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The Fixed Income Strategy is to invest in high-quality issues with a primary focus on sector and security selection and a secondary focus on duration. The primary objective of the Fixed Income Strategy is to meet or exceed the total return of the strategy’s benchmark, the Lehman Intermediate Government/Credit Index.
The Strategy concentrates on the intermediate section of the yield curve. The average maturity of the portfolio is approximately four years, and its effective duration is about three years. The Strategy invests in U.S. Treasuries, U.S. Agency securities, mortgage-backed and some asset-backed securities and corporate bonds. The corporate bonds purchased must have a credit rating of A or above. The mortgage-backed securities are concentrated in obligations of Government National Mortgage Association (GNMA) and are limited to Planned Amortization Class (PAC) and sequential Collateralized Mortgage Obligations (CMO).
The selection process begins in a top-down fashion, determining overweighted or underweighted sectors (corporates, treasuries, etc.) versus the benchmark. On corporate bonds, the research department screens companies not only by liquidity factors (e.g., interest coverage, debt/capital ratio), but also by equity factors (e.g., earnings per share, return on equity). UMB believes that these equity factors are often precursors to changes in a company’s credit protection measures.
NOT FDIC INSURED • MAY LOSE VALUE • NO BANK GUARANTEE
* Subadvised by Scout Investment Advisors, an affiliate of UMB Bank.
Copyright 2015 UMB Financial Corporation
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