Active Solutions

DISCIPLINED INVESTMENT APPROACH

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 six 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. 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 6 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.

BROAD HIGH YIELD MARKET STRATEGY*

The Broad High Yield Market Strategy is actively managed and invests in U.S. dollar- denominated debt securities, primarily below investment grade and issued by U.S. companies. The strategy’s investment objective is to achieve a long-term total return greater than the ICE BofA US High Yield Index or a mutually agreeable similar high yield benchmark selected by our clients, although the portfolio manager has discretion to invest in out-of-index securities. This is a non-leveraged long only strategy. Generally, below-investment-grade corporate debt securities are rated below BBB- (i.e., BBB minus) by Standard & Poor’s or below Baa3 by Moody’s or an equivalent rating by another Nationally Recognized Statistical Rating Organization (“NRSRO”). Some below-investment-grade corporate debt securities are not rated by a NRSRO.

SHORT DURATION HIGH YIELD STRATEGY*

The Short Duration High Yield Strategy is actively managed with the objective of generating a relatively high level of current income and lower volatility than the broader high yield market, respectively. This is an absolute return strategy and is generally not managed against any particular benchmark, although the firm manages other accounts and portfolios that are substantially analogous to the Short Duration High Yield Strategy but incorporate a comparative benchmark. This is a non-leveraged long only strategy.

*Past performance is not a guarantee or a reliable indicator of future results.Investing involves risk; principal loss is possible. Investors should carefully consider risk when investing in bonds, which include, but are not limited to, default, credit rating, interest rate, duration, prepayment, liquidity, and structural risks.There is no guarantee that investment strategies presented will work under all market conditions. Risk management processes cannot eliminate the risk of losses. Diversification does not assure a profit nor protect against loss in a declining market. Each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market. Refer to theLegal & Disclosuressection for additional disclaimers and disclosures regarding performance, risk, and investment process.

Information presented is for informational purposes only. It is not intended as investment advice. Nothing in this publication is a solicitation of any type. For U.S. institutional investors only. Please review Pugh Capital’s Form ADV Part 2A for important information about risk, services offered, and fees, which is available upon request. Please contact Deanna Hobson, Deputy CEO, at (206) 322-4985, or write Pugh Capital Management, 520 Pike Street, Suite 2900, Seattle, WA 98101, or info@pughcapital.com