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Fixed Income Sector

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investment-grade and high-yield securities (max 15% below B rating) ... Exposure to short-dated interest rate swaps. Benchmark: JPMorgan GBI Global Hedged in USD ... – PowerPoint PPT presentation

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Title: Fixed Income Sector


1
Fixed Income Sector
  • Franz Russler
  • Gregory Duperon
  • September 29, 2009

2
TOC
  • What is Fixed Income?
  • Bonds Up Close
  • Investment Vehicles
  • Our Holdings
  • General Thoughts

3
What is Fixed Income?
  • Bonds
  • Government
  • Corporate
  • Certificates of Deposit (CDs)
  • Commercial Paper
  • Savings Accounts
  • Preferred Stock

4
Bonds A Closer Look
  • How do they work?
  • Par Value Price Earnings
  • Maturity length
  • Coupon Rates (Computed Yields)
  • Government Bonds
  • US Treasuries
  • Bills, Notes Bonds
  • Municipal Bonds
  • Are government bonds guaranteed?

5
Bonds A Closer Look (2)
  • Credit Rating of the Issuer
  • Investment Grades
  • High-Yield (Junk)

6
Bonds A Closer Look (3)
  • Factors Affecting Yield
  • Current Price
  • Market Interest Rates
  • Maturity
  • Inflation
  • Lowers the Par Value

7
Investment Vehicles
  • Individual Bonds
  • Credit Maturity ? Yield
  • Bond Funds
  • Strategy Style Maps
  • Money Markets
  • Real Return
  • Exchange Traded Funds (ETFs)
  • Isolation Strategy

8
Our Holdings
9
Our Holdings (2)
10
Performance v . SP 500
11
Commodity Real Return Fund (PCRCX)
  • Strategy
  • invests in commodity-linked derivative
    instruments
  • commodity index-linked notes, swaps, options,
    futures, options on futures!
  • backed by a portfolio of inflation-indexed
    securities and other FI instruments
  • Risks
  • Commodity risk
  • Derivatives risk
  • Subsidiary risk

12
Commodity Real Return Fund (PCRCX)
13
Commodity Real Return Fund (PCRCX)
14
Commodity Real Return Fund (PCRCX)
  • Highlights
  • U.S. Agency mortgage-backed securities benefited
    performance as mortgage spreads tightened
  • Lowlights
  • Commodities declined 44.99 . Energy sector was
    down 62.74 during period.
  • TIPS, the funds collateral, underperformed
    benchmark
  • Exposure to U.S. corporate bonds in financial
    sector
  • Emphasis on inflation-linked bonds in Japan
  • Benchmark Dow Jones-AIG Commodity Index Total
    Return

15
Emerging Markets Bond Fund (PEBCX)
  • Strategy
  • invests at least 80 of assets in instruments
    economically tied to emerging markets
  • could be forwards, options, futures, swaps
  • investment-grade and high-yield securities (max
    15 below B rating)
  • may be denominated non-U.S. currencies
  • Risks
  • currency risk
  • emerging markets risk
  • high-yield risk

16
Emerging Markets Bond Fund (PEBCX)
17
Emerging Markets Bond Fund (PEBCX)
18
Emerging Markets Bond Fund (PEBCX)
  • Highlight(s)
  • Underweighting Ecuador, Venezuela and Pakistan
  • Lowlight(s)
  • Overweighting Russia
  • Underweighting Lebanon and Turkey missed
    opportunities
  • Benchmark JPMorgan Emerging Markets Bond Index
    (EMBI) Global

19
High Yield C Fund (PHDCX)
  • Strategy
  • at least 80 in high-yield securities
  • can include forwards, options, swaps
  • 20, possibly, in securities dominated in foreign
    currencies
  • 15, possibly, in emerging market securities
  • 10, possibly, in preferred stocks
  • Risks
  • default risk
  • currency risk
  • liquidity risk

20
High Yield C Fund (PHDCX)
21
High Yield C Fund (PHDCX)
22
High Yield C Fund (PHDCX)
  • Highlight(s)
  • Exposure to investment-grade bonds, which
    outperformed high-yields by 15.
  • Overweighting healthcare sector, which benefited
    as investors sought defensive plays
  • Underweighting gaming sector
  • Lowlight(s)
  • Overweighting financial sector
  • Underweighting environmental sector, which was
    among the top performers in high-yield market
  • Overweighting auto-related bonds
  • Benchmark Merrill Lynch U.S. high-Yield, BB-B
    Rated, Constrained Index

23
Global Bond Fund (USDHedged) (PCIIX)
  • Strategy
  • invests at least 80 of assets in securities
    economically tied to at least 3 countries
  • forwards, options, futures, swaps
  • may invest up to 10 in high-yield securities (B
    and higher)
  • Risks
  • currency risk
  • interest rate risk
  • default risk

24
Global Bond Fund (USDHedged) (PCIIX)
25
Global Bond Fund (USDHedged) (PCIIX)
26
Global Bond Fund (USDHedged) (PCIIX)
  • Highlights
  • Underweighting British pound
  • Lowlights
  • Positions in Agency and non-Agency
    mortgage-backed securities and other asset-backed
    securities
  • Japanese inflation-linked bonds, which
    underperformed nominal Japanese government bonds
  • Corporate bond holdings of select financial
    companies
  • Exposure to short-dated interest rate swaps
  • Benchmark JPMorgan GBI Global Hedged in USD

27
General Discussion
  • Where is the market heading?
  • Market Interest Rates
  • Inflation
  • How do we want to allocate Fixed Income?
  • Holistically
  • Individually
  • Other Considerations?
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