Investment Strategies - Fixed Income

Process

Montag & Caldwell employs an active, yet conservative, approach to the management of fixed income portfolios. Portfolios are constructed taking the benchmark index, which is typically the Lehman Brothers Government Credit Index or the Lehman Brothers Aggregate Index, and client guidelines into consideration.

The Investment Policy Group, consisting of all portfolio mangers and analysts, determines the outlook for the economy and interest rates through an analysis of the business cycle. Fed policy, GDP growth, inflation rate expectations, the unemployment rate, exchange rates, industrial production and capacity utilization are factors influencing the duration decision. The weighted average duration is targeted to be long or short versus the benchmark index in accordance with the economic outlook of the Investment Policy Group.  Our duration decisions are implemented within a limit of +/- 20% of the benchmark index.  The average duration of our clients’ portfolios is adjusted as our outlook changes, which may be monthly or as infrequently as quarterly.  Large percentage moves are avoided, with a typical change of 3%.

Analysis of the yield curve is conducted to implement the duration decision.  Various points along the yield curve may be under or overweighted versus the index based upon a relative rich/cheap analysis.  The historical shape of the yield curve in the context of the current stage of the business cycle plays a role in this analysis. Montag & Caldwell does not utilize strict barbell/bullet strategies, as a percentage of our portfolios will always be maintained in the middle of the yield curve.  However, if a flattening of the yield curve is anticipated, with long rates falling, a barbell strategy will be utilized, to the extent that we will underweight the middle of the curve.  Conversely, if a steepening of the yield curve is anticipated, a bullet strategy will be employed.