Fixed income plays an important role as the ballast in a diversified, balanced investment portfolio. It is intended to provide stable cash flow and income. Even during periods of relatively low interest rates, they can act as a balance to downside risk in equity holdings. In times of strong equity performance and/or low interest rate yields, shifting money away from fixed income can be tempting, but prudent long-term portfolios should maintain a balanced strategy.
In our overall strategy of selecting Fixed Income securities, we favor investment grade Corporates, Agency debt, U.S. Government paper (including TIPS), and Municipals.
Chelsea Management’s approach to fixed income investing is to “ladder” our portfolios to both capture the current interest rate environment and level out overall returns over time. Our average maturities typically extend through five to seven years. As interest rate dictates, we will either lengthen or shorten our ladder to take advantage of what the markets offer.
During the portfolio development phase of client interactions, Chelsea Management creates a long-term, fixed income, asset allocation model reflective of the clients’ expressed risk tolerances through multiple market cycles. Chelsea Management endeavors to mitigate relative risk by selecting maturities, ratings, and issuers to comport with our understanding of client wishes.
Chelsea Management builds separately managed fixed-income accounts using individual credits as we believe this provides superior risk control. Additionally, it can allow for an overall portfolio that better reflects client needs.
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