PORTFOLIO MANAGEMENT

PHILOSOPHY

 

 

Portfolio Management

 

 

 

 

 

We believe that the investment grade fixed income market misprices default and call risk. Therefore, we strive to outperform our relevant fixed income benchmark by concentrating our investments in corporate bonds, agency mortgage-backed securities, commercial mortgage-backed securities, and asset-backed securities. We carefully manage the risk in these sectors with a quality bias and extensive diversification.
 

APPROACH

We continuously monitor relative value relationships across investment grade and high yield fixed income sectors. Our investment team of sector specialists meets daily to share market insights and collaborate on portfolio investment decisions. We conduct proprietary bottom-up research on the universe of USD fixed income issuers. We supplement our analysis by gathering data from the street, third party research sources and rating agencies. We underwrite and stress test credits in the structured sector to find bonds that offer the highest return with the greatest margin of safety. We believe our approach results in more timely and forward looking conclusions about where value exists in the fixed income market. This allows us to overweight sectors and names we believe will outperform, and avoid parts of the market we find unattractive. In the end, our macro sector weights are determined through the rigorous internal debate over relative value.
 

PROCESS

Thanks to our firm's size and experience, we have a security selection advantage. We can invest in a way that big firms cannot. Increasingly rare among fixed income offerings, we construct "all cash" portfolios and do not need derivatives to take risk. In a bond market preoccupied with primary issuance, we closely follow the secondary market for individual security ideas. We consider variables such as callability, deal size, and market conditions when we think about each position.  As “buy and hold” investors, we have a liquidity advantage which, for example, means we can evaluate and invest in smaller deal, non-index bond issues when they offer enough reward.  Finally, we care about trade execution. We evaluate the price of every bond transaction on an individual basis and are not willing to accept a blended price for a list of trades.


RISK MANAGEMENT

We are careful about risk. We diversify carefully, we consider liquidity, and we pay close attention to our clients' investment policy guidelines.  We have developed internal portfolio systems that allow us to evaluate the various fixed income risk variables (interest rate risk, yield curve risk, credit risk, and structure risk) during portfolio construction.  Additionally, our systems perform an ongoing check at the individual security level which allows us to deliver not only risk management, but the attention to detail that our clients expect.


Composite Returns

Historical performance returns on our fixed-income composites are available along with a description of the types of portfolios included in each composite. Richmond Capital Management claims compliance with the Global Investment Performance Standards (GIPS®) and is registered with the Securities and Exchange Commission. To obtain a presentation of the requirements for GIPS and a list with descriptions of all firm composites, please call or email.