Overview and Process
At D.B. Fitzpatrick & Co. we have a long-held philosophy that investors hold fixed income to effectively budget overall portfolio risk, and we believe this is best accomplished with very selective or minimal credit risk. Therefore, we offer fixed income products that include a credit component, as well as fixed income products that hold exclusively Aaa-rated U.S. government guaranteed securities.
We emphasize U.S. government agency mortgage-backed securities (MBS) in client portfolios due to their historical yield advantage relative to U.S. Treasury bonds, as well as for their cash flow characteristics. Government agency MBS are either explicitly or implicitly guaranteed by the U.S. Treasury and pay interest and principal on a monthly basis. Non-callable Treasury bonds, federal agency bonds, and corporate bonds (depending on the client mandate) are also included in client portfolios to reduce the negative convexity and prepayment risk associated with MBS.
The DBF fixed income management process begins with a comprehensive top-down economic forecast. From our economic forecast we develop a Treasury yield curve forecast over a six to twelve-month horizon. Given our yield curve forecast, we position client portfolios to take advantage of anticipated interest rate and yield spread movements while keeping portfolio duration within ranges mandated by each strategy. Slight duration tilts, sector selection, and individual security selection add value, along with tactical coupon and maturity selection. Spread risk is managed through issuer and sector diversification. All securities held in client portfolios are extremely liquid, allowing maximum flexibility for clients.
We have built an impressive 20-year track record of fixed income returns driven by our consistent philosophy and process. Our clients have enjoyed steady growth, low volatility, and portfolio performance that compares favorably to our competitors and market benchmarks.
Fixed Income Strategies: