Although we customize all portfolios to the specific needs of our clients, AAM’s core bond strategy can be the least constrained of our investment strategies. Core bond offers insurers a broadly diversified investment grade portfolio that emphasizes stable income, predictable cash flows and stable credit ratings with the goal of generating consistent excess returns relative to the market.
Our core bond strategy incorporates top-down and bottom-up inputs into a relative value framework for identifying sector weightings and specific security recommendations. Recognizing the income needs of our insurance clients, AAM will typically hold small allocations to Treasuries and agencies in favor of other high quality sectors that offer incremental yield, such as corporate bonds, MBS, CMOs, taxable municipals and seasoned CMBS.
AAM does not make interest rate bets in our client portfolios because we do not believe that this is a sustainable source of excess returns. As a result, the duration of the portfolio is targeted to either the portfolio’s benchmark index or a predetermined actuarial metric. Our trading and research analysts have a long-term investment horizon, so we are able to limit portfolio turnover and mitigate tax issues associated with realizing gains and losses.
The core bond strategy is generally suitable for insurance companies across the Property & Casualty, Life, Health and Captive industries that are seeking a well-diversified fixed income portfolio that balances current income potential with long-term total returns.