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Fixed Income Portfolio Manager:
William F. Cox, CFA view Bill Cox's profile
Philosophy
The primary objective of Berkeley Capital Management’s Fixed Income
investment policy is to add value through security and sector valuation
analysis without depending on the uncertainty of interest rate
forecasting. We design portfolios aimed to provide superior investment
returns at low levels of risk while allowing for maximum financial
flexibility. We work closely with clients to identify strategic
portfolio objectives based on their risk tolerances and constraints.
Investment Process
BCM’s Fixed Income investment process incorporates a disciplined,
conservative approach to active management. It is active because we
believe that periodically repositioning a portfolio’s emphasis toward
those fixed income characteristics that will benefit most during certain
phases of the business cycle can produce consistently superior
performance. Part of this portfolio repositioning is an intensive look
at earnings and revisions of earnings estimates by corporate bond
issuers, with a view to invest in companies which will improve their
ability to service their debt in the future. We overlay all of this
analysis with a macro review of the current position in the business cycle.
- Business Cycle Analysis –
Economic activities generally move in cycles, lasting three to
six years. Since the late 1950s, the typical business cycle has
lasted approximately 65 months, with the expansion phase forming
the longest segment within the cycle. Factors which change over
the course of a cycle include prices as well as output, markets
for securities and commodities, spending and saving patterns,
and the flow of goods to consumers and business enterprises. We
utilize major economic indicators to develop an estimate of the
current cycle phase which is then applied as a primary input to our
Fixed Income investment management process.
- Interest Rate Position –
BCM’s active Fixed Income investment process limits the duration
exposure of its portfolios to plus or minus 10% of the benchmark
or index against which it is managed. This allows the portfolio
to maintain a risk profile near the targeted benchmark while
adjusting the other portfolio characteristics (i.e., sector,
quality, coupon) to add value. A decision to revise the duration
characteristic of a portfolio incorporates our business cycle
discipline and is at its most bullish position during a late
contraction and its most bearish position during a peak and
early contraction.
- Coupon Weighting –
Recognizing that the price volatility of a bond increases as its
coupon decreases, BCM’s process provides the framework to modify
the coupon exposure of the portfolio. Portfolio weighted average
coupon is adjusted to reflect our business cycle and interest
rate outlook.
- Specific Issue Selection –
Our security analysis focuses on earnings and balance sheet
forecasts as a means of augmenting the historical perspective of
credit analysis. By monitoring the trend in estimates, it is
possible to identify and capitalize on candidates for credit
rating changes before the action is announced by the rating agencies.
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Copyright 2001 Berkeley Capital Management.® All rights reserved.
Berkeley Capital Management is registered with the SEC under
the Investment Advisors Act of 1940. All information provided herein
is general in nature. Nothing on this page constitutes an offer to
sell securities, provide investment services of any description, nor
constitutes investment or legal advice.
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