DISCIPLINED INVESTMENT APPROACH

ASSETS UNDER MANAGEMENT

5 53 89 107 381 615 675 1,016 1,079 1,422 1,769 1,998 2,464 2,616 3,677 3,910 4,681 4,759
91 93 95 97 99 01 03 05 07 09 10 11 12 13 14 15 16 17
(USD Millions as of June 30, 2017)

CORE FIXED INCOME

The Core Fixed Income strategy seeks to add value relative to the benchmark and peers by minimizing downside risk across the portfolio through diversification, while adding incremental return through sector rotation and issue selection. The average credit rating of the strategy is generally AA. Its effective duration is managed within a range of +/- 10% of the benchmark duration, which is usually between four and five years.

LONG DURATION

Our Long Duration Strategy seeks to outperform client benchmarks on a risk-adjusted basis. We believe an active management approach to asset-liability risk management is the best strategy to meet plan objectives given: the asymmetric impact of defaults and downgrades in the valuation of pension liabilities and fixed income portfolios, the opportunities that sector allocation provides over a market cycle and the inefficiencies that exist in long duration securities. Alpha generation is sought through both bottom up security selection and sector rotation. Our strategy emphasizes downside risk management and our performance differentiation is anticipated to come from sector rotation during “risk-off” environments and more defensive security selection. Duration targets match the liability benchmark with very little deviation. Our Long Duration Strategies are strictly comprised of investment grade securities denominated in U.S. dollars.

CORE PLUS

The Core Plus Fixed Income Strategy seeks to add value relative to the benchmark and peers by minimizing downside risk across the portfolio through diversification, while adding incremental return through sector rotation and issue selection. In addition, the strategy opportunistically invests in high yield bonds and overweights investment grade credit relative to our Core Fixed Income strategy. The strategy contains U.S. dollar denominated corporates, governments, mortgage-backed and asset-backed securities with stated maturities typically from one to thirty years. The strategy will generally have average credit quality of A or better and usually have an average effective duration between 4 and 5 years.

LONG CREDIT

The Long Credit Strategy seeks to add value relative to the benchmark by minimizing downside risk across the portfolio through diversification, while adding incremental return through sector rotation and issue selection. The composite includes all fee-paying, fully discretionary portfolios that invest in the Long Credit Strategy. The strategy is invested in investment-grade securities, including governments, corporates and taxable municipals, with an emphasis on maturities between ten and thirty years. The average credit rating of the portfolios is generally A. The average effective duration of this strategy ranges from 10 to 15 years. The Long Credit Strategy invests in securities with a credit rating of BBB- or higher.