Medium-grade Fixed Income

The fixed income investment process employs an integrated bottom-up, top-down approach. The process emphasizes uncovering attractive valuation opportunities based upon fundamental perspectives. Overlaying the bottom-up approach is a comprehensive understanding of the economic, political and social characteristics that influence the capital markets. In order to develop the firm's fundamental perspective on a security, the management team utilizes several means including rating trend analysis, yield spread analysis, and liquidity analysis.

Our distinctive, blended fixed income approach seeks to outperform broad investment grade and high yield indices in the long-term (3, 5, 10-year, etc.). We believe this serves as a lower volatility alternative to high yield. Our approach focuses on US corporate bonds, Treasuries and "busted" (or out of the money) convertible bonds.  The bottom-up security selection process focuses on crossover credits (mostly BBB & BB with some B-rated). The strategy does NOT utilize derivatives, structured products (asset-backed, mortgage-backed), or securities rated below single-B. Portfolios will normally be relatively duration neutral (+ or - 10% to benchmark), with an average quality of BBB or higher and a maximum 50% weighting in BB or B-rated debt. As of July 31, 2010, portfolios had an average quality of BBB.

Some clients choose to benchmark the product against a traditional broad market index such as the Barclays Ba-B index or Barclays Aggregate Bond index.  However, other clients have chosen to utilize a hybrid benchmark for performance measurement, such as 60% Barclays Gov't/Credit & 40% Barclays Ba-B index.

Our Medium-grade fixed income product inception is January 1990.  As of July 31, 2010, GW Capital managed $396.3 million in the Medium-grade Fixed Income product.