Investment Strategies

Products and Investment Strategies

Core Intermediate Tax-Exempt Fixed Income Strategy (Designed for Full Taxpayers)

The Core Intermediate Tax-Exempt Fixed Income Strategy is designed for taxable investors with a long-term investment horizon who seek to maximize after-tax returns with a lower degree of volatility than typical fixed income market strategies. We seek to build tax-exempt municipal portfolios that generate significant yield over the benchmark in the municipal fixed income markets with lower principal volatility by:

  • Determining our outlook for the economy and interest rates and identifying the securities that offer the best value given our internal market forecast
  • Purchasing securities with favorable risk reward characteristics including high premium bonds, premium callable and discount callable bonds, sinking fund bonds and non-callable and callable zero coupon bonds
  • Adding value by taking advantage of seasonal supply and demand; for instance buying at specific times of the year when demand is low or selling bonds due to mature in a year and opportunistically reinvesting the proceeds at the optimal time, rather than blindly reinvesting as bonds mature

Benchmarked against the Lehman Brothers 1-10 Year Municipal Index, the target duration for this strategy is typically four years.

Core Intermediate AMT Fixed Income Strategy (Designed for Taxpayers subject to the Alternative Minimum Tax)

The Core Intermediate AMT Fixed Income Strategy is designed specifically for taxable investors with a long-term investment horizon who are subject to the Alternative Minimum Tax (AMT), and who seek to maximize after-tax returns with a lower degree of volatility than typical fixed income market strategies.

In contrast to the core fixed income strategy for full taxpayers where we invest only in tax-exempt municipal securities, and based upon in-depth research, we generally have found it is advantageous to invest in a crossover strategy of taxable and tax-exempt municipal securities. Specifically, we substitute the shorter end of the portfolios with certain U. S. Government Agencies that offer a higher after-tax yield than municipal bonds. For clients in high tax states such as California and New York, we purchase only state-tax exempt Agencies, including Federal Home Loan and Federal Farm Credit Banks.

Clients may move in and out of the AMT on a regular basis, so we build portfolios that will allow them to easily roll out of their short-term positions. The target duration for this strategy is typically four years. The benchmark index is generally a blend of 40% Lehman Brothers 1-3 Year Treasury Index and 60% Lehman Brothers 1-10 Year Municipal Index.

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