Fixed-Income Taxable

  • Overview

    Overview

    Fixed-income securities have proven over time to be a critical part of well-allocated portfolios because it is important to have assets that aren’t correlated to stock-market investments. Bond investing has become increasingly challenging over the years and we believe that an actively managed fixed-income portfolio — either through a separately managed account or a mutual fund — may make sense for long-term investors. To that end, Eagle Asset Management has employed an experienced team of bond managers, analysts and traders to help investors meet their long-term financial goals.

    Investment Process

    Portfolio managers anticipate and respond to changing market conditions such as:

    • Interest-rate trends
    • Economic outlook
    • Federal Reserve policy
    • Sector valuations

    After analyzing these variables, managers establish current strategies and maturities for the portfolios. Securities are selected from a broad base and are evaluated on their status in the following categories:

    • Current yield
    • Credit quality
    • Call risk/protection
    • Coupon structure
    • Capital gains potential
    • Inefficient pricing

    Generally speaking, management focuses more on structural bond analysis than credit analysis. Management believes that there are good opportunities to capitalize on the market's inefficiencies by investing in securities with unique characteristics that may help to reduce portfolio volatility and enhance yield. Our research staff carefully analyzes the structural features of asset-backed and mortgage-backed securities.

    Sell discipline

    • Current portfolio-maturity profile no longer met by bond
    • Significant negative change to credit rating
    • Development of more attractive investment opportunity
    • Taking advantage of capital gains without compromising long-term income returns
    • Calling of bond



    Portfolio Characteristics (as of November 30, 2018)

    Taxable Managed Income Solutions1, 2, 3

    Benchmark

    Bloomberg Barclays
    Aggregate

    Average Duration

    5.95

    Average Maturity

    7.63

    Yield to Maturity

    3.44%

    Account Minimum

    $200,000


    High Quality Taxable1, 2, 3, 4

    Benchmark

    Bloomberg Barclays
    Intermediate Gov't/Credit Index

    Average Duration

    3.95

    Average Maturity

    4.40

    Yield to Maturity

    3.27%

    Account Minimum

    $200,000


    Government Securities1

    Benchmark

    Bloomberg Barclays
    Inter. Gov't Index

    Average Duration

    3.71

    Average Maturity

    4.10

    Yield to Maturity

    2.94%

    Account Minimum

    $200,000


    Short Term Conservative1, 2

    Benchmark

    Bloomberg Barclays
    1-3 Year Gov't Index

    Average Duration

    1.49

    Average Maturity

    1.69

    Yield to Maturity

    2.86%

    Account Minimum

    $2,000,000


    Risk Information
    Risks associated with Fixed Income investing: many investors consider bonds to be “risk free” investment vehicles. Historically, bonds have indeed provided less volatility and less risk of loss of capital than has equity investing. However, there are many factors that may affect the risk and return profile of a fixed-income portfolio. The two most prominent factors are interest-rate movements and the creditworthiness of the bond issuer. Bonds issued by the U.S. government have significantly less risk of default than those issued by corporations and municipalities (see footnotes 3 and 4 below for a discussion of the risk associated with high-yield bonds and convertible securities). However, the overall return on government bonds tends to be less than these other types of fixed-income securities. Investors should pay careful attention to the types of fixed-income securities that comprise their portfolio, and remember that, as with all investments, there is the risk of the loss of capital.

    Not every investment opportunity will meet all of the stringent investment criteria mentioned to the same degree. Trade-offs must be made, which is where experience and judgment play a key role. Accounts are invested at the discretion of the portfolio manager and may take up to 60 days to become fully invested.

    (1) Asset-backed securities and mortgage-backed securities are created by pooling loans from a variety of sources and issuing bonds that are backed by these loans. Creditworthiness stems from the credit quality of the underlying loans, as opposed to corporate bonds in which creditworthiness is derived from the earning power of the issuing company. The primary risk of these securities is interest-rate risk. Rising interest rates might cause loan principal prepayments to slow, resulting in less available principal to invest at prevailing higher rates. Conversely, rate decreases might accelerate prepayments, leaving more dollars to invest at lower rates.

    (2) Investment grade refers to fixed-income securities rated BBB or better by Standard & Poor's or Baa or better by Moody's.

    (3) Convertible securities and preferred stock combine the fixed-income characteristics of bonds with some of the potential for capital appreciation of equities and, thus, may be subject to greater risk than pure fixed-income instruments. Unlike bonds, preferred stock and some convertible securities do not have a fixed par value at maturity, and in this respect may be considered riskier than bonds. Convertible securities may include convertible bonds, convertible preferred stocks and other fixed-income instruments that have conversion features.

    (4) Investments in high-yield bonds and convertible securities are subject to the client's authorization, as set forth in the Investment Management Agreement. Such investments may be subject to greater risks than other fixed-income investments. The lower rating of high-yield bonds (less than investment grade) reflects a greater possibility that the financial condition of the issuer or adverse changes in general economic conditions may impair the ability of the issuer to pay income and principal. Periods of rising interest rates or economic downturns may cause highly leveraged issuers to experience financial stress, and thus markets for their securities may become more volatile. Moreover, to the extent that no established secondary market exists, there may be thin trading of high-yield bonds, which increases the potential for volatility. 

    Be sure to consider your financial needs, goals, and risk tolerance before making any investment decisions. Eagle does not provide legal, tax, or accounting advice. Any statement contained in this communication concerning U.S. tax matters was not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code. Before making any investment decisions, you should obtain your own independent tax and legal advice based on your particular circumstances.


    Definitions
    Duration - is a measure of the average life of a bond, weighting each repayment by the time until it will be made and reflecting the fact that money flows in the near future are more valuable than the same money flows at a later date. Duration indicates how changes in interest rates will affect the price of a bond (or bond portfolio). The longer the duration of a bond, the greater the extent to which its price is affected by interest rate changes. As such, duration is used as a measure of risk for bond portfolios.

    Maturity - The date on which a loan or bond comes due and is to be paid off.

    Yield to maturity - The yield of a bond to maturity takes into account the price discount from or premium over the face amount. It is greater than the current yield when the bond is selling at a discount and less than the current yield when the bond is selling at a premium.

  • Investment Team

    Taxable Fixed Income Investment Team

    James Camp

    James C. Camp, CFA

    Managing Director, Portfolio Manager

    29 Years Of Industry Experience

    21 Years With Eagle Asset Management

    Joseph Jackson

    Joseph Jackson, CFA

    Portfolio co-Manager & Senior Credit Analyst

    19 Years Of Industry Experience

    14 Years With Eagle Asset Management

    Rubin Bahar

    Rubin Bahar, CFA

    Senior Research Analyst

    30 Years Of Industry Experience

    7 Years With Eagle Asset Management

    Bishop Jordan

    Bishop Jordan, CFA

    Senior Credit Analyst

    17 Years Of Industry Experience

    Less Than 1 Year With Eagle Asset Management

    John Lagowski

    John Lagowski, CFA

    Research Analyst

    11 Years Of Industry Experience

    3 Years With Eagle Asset Management

    Steven Chylinski

    Steven Chylinski, CFA

    Senior Fixed Income Trader

    18 Years Of Industry Experience

    18 Years With Eagle Asset Management

    K. Dean Vrakas

    K. Dean Vrakas

    Senior Fixed Income Trader

    14 Years Of Industry Experience

    13 Years With Eagle Asset Management

    Jason Follert

    Jason Follert, CFA

    Asset Management Trader

    14 Years Of Industry Experience

    13 Years With Eagle Asset Management

    Ed Rick

    Ed Rick, CFA

    Head of Client Portfolio Management

    24 Years Of Industry Experience

    4 Years With Eagle Asset Management

  • Performance

    Fixed Income Taxable Performance
  • Literature

    Documents available for download


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