A private placement is a debt security that is exempt from registration with the Securities and Exchange Commission (SEC) under Regulation D of the Securities Act of 1933. Privately placed debt encompasses a wide variety of fixed income investments including corporate obligations, real estate related, project finance, and asset backed loans. Each year there is approximately $38 billion of fixed income private placement debt issuance.

Privately placed debt provides an enhanced yield over comparably rated public securities as well as access to issuers that are not available in the public market. The yield advantage of private placement bonds generally equates to an increased spread of 10-50 basis points along with more restrictive covenants or security than comparably rated public securities. The different issuers also provide some issuer diversification to the overall portfolio.

Life insurers are significant investors in the corporate bond market, having been the largest institutional holder of corporate bonds issued in the U.S. markets since the 1930s. Private placements account for a sizable share of life insurer investments in corporate bonds. Life insurance companies are the major lenders in the private placement market*.

AAM emphasizes ‘BBB’ through ‘A’ credit quality corporate credits for private placement bonds. Our customized portfolios typically purchase NAIC 1 and 2 issues that are well diversified by industry and issuer. The average rating for our private placement portfolio is A and the average duration is approximately 4.8 years.

AAM offers several advantages in the management of private placement securities:

• Our collective buying power enables our clients to access this market effectively.
• AAM customizes each client portfolio to meet individual quality, duration, yield and liquidity parameters.
• AAM is independent and does not invest in private placements for its own account. Our allocation of funds is based solely on clients' goals and needs.
• Our experienced team of 5 investment professionals has over 50 years of combined experience in the sector.

*American Council of Life Insurers, Fact Book, 2006