Core Plus Fixed Income Strategy
Due to the global evolution of the fixed income markets, we believe opportunities for alpha exist beyond traditional U.S bonds that can enhance the risk/return profile of an income portfolio. We believe a portfolio with general target of 70% core fixed income securities provides a foundation for the portfolio. In addition, we target 30% of the portfolio with a unique focus on global opportunities less correlated to U.S interest rates. Combined, this provides flexibility to seek returns in an effort to outpace the Barclays U.S. Aggregate Index.
The Core Plus Fixed Income Strategy seeks to add value through three major themes: global flexibility, low correlation amongst sectors and a relative value approach with emphasis on high quality and high current yield.
Enables the strategy to seek investment opportunities from a wider array of choices than traditional fixed income. We believe utilizing the preferred asset class allows us access to an asset class which provides higher current yield, where there are more opportunities to find value while providing a less correlated result to fixed income.
By seeking a reduced correlation to traditional bonds, the strategy seeks to lessen the impact a specific sector might have on overall results.
The emphasis on income and relative value provides somewhat of a buffer to performance, since the yield provides a certain amount of stable return and we do not overpay to acquire certain holdings.
We seek opportunities around the globe, in a variety of risk profiles where we find relative value in an effort to reduce correlation to traditional bonds
David Withrow, Director of Portfolio Management
Core Plus Fixed Income process
The Core Plus Fixed Income Strategy has a transparent, repeatable investment process. We perform research across the capital structure to determine the optimal part of a company’s capital structure to own debt. The investment process utilizes a combination of top-down and bottom-up analysis.
Our security selection is primarily driven by sector perspective, bottom-up research, capital structure analysis, extensive cash flow analysis, and yield opportunities with a relative value approach. In addition, we seek positive catalysts as part of our analysis for a new position. Every security purchased has its own specific set of catalysts or drivers as well as an investment target or outcome. Each is constantly evaluated
Red Cedar's top down strategy involves an overall macroeconomic analysis, which will then reflect a view on credit, interest rates, spreads and secular trends. Our credit team generates an internal view on which sectors to overweight and underweight within the investment grade universe. In addition, we analyze correlations between various asset classes on an ongoing basis and formulate a view as to how they will adjust in the future. From this ongoing analysis, we will make shifts to overall asset class allocations and discuss the strategy considerations.