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May 2017
March 2017
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December 2016
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OLDER UPDATES




INVESTMENT PHILOSOPHY



Agincourt's fixed income style is a yield driven, active management approach, focusing on value and minimizing interest rate forecasting and market timing. We believe that consistency of returns is the key to building an outstanding long-term record. Agincourt uses three strategies in managing total return fixed income portfolios: Sector Management, Security Selection and Yield Curve/Duration Management.
Sector Management
Sector Managment is our most important and most aggressive strategy. We begin with a preference for higher-yielding securities (US Agency mortgage pass-throughs and high-grade corporates) since yield is the predominant source of return in a bond portfolio. Over- and under-weights in the various sectors are based on historical yield spread analysis, overlaid against key "macro" measures: fundamental industry credit trends, economic trends, and current and prospective business conditions. The goal is to produce highly diversified, high quality portfolios that possess more yield and better total return prospects than the market.


 

 

Security Selection
Once the broad sector and industry sector weightings are made, we look for the best individual securities to add to our clients' portfolios. In corporates, we look at qualitative factors (industry position, quality of management, attitude torward bond holders, and ratings agency trends), as well as quantitative measures (ratio analysis, security valuation and analytics). In mortgage-backed securities, we examine broad trends in the housing market (geographic and demographic trends, for example) as well as extensive security analysis (interest rate/prepayment scenarios, Agency vs. non-Agency analysis, option-adjusted spread analysis). Supply and demand factors are also analyzed, as market "technicals" can have a powerful short-term impact on the market.
Yield Curve/Duration Management
Since changing yield curves can dramatically impact total returns, we carefully analyze the yield curve to arrive at an optimal yield curve allocation. We use computer analysis to test various yield curve structures in multiple scenarios, using the results to help structure our client portfolios. Client portfolios are arranged as efficiently as possible, given the duration target.

Agincourt's duration strategy is designed to reduce the volatility of returns in clients' portfolios. We maintain a neutral to a slightly shorter-than-market duration in order to achieve this goal. Duration may be as low as 90% of the benchmark's adjusted duration or as high as 100%; although, the typical range is 95%-100%. Adjustments in the duration target are modest. Real, inflation-adjusted yields are the primary (but not only) measure that we use to set our duration target - the higher real yields are, the more likely we extend the duration of our clients' portfolios, and vice-versa.


 












 

 

 

 

200 South 10th Street, Suite 800
Richmond, VA 23219
T: 804.648.1111 F: 804.864.2611
acm@agincourtcapital.com