Investment Grade Fixed Income
Short Duration High Grade Corporate Fixed Income
The Short Duration High Grade Corporate strategy stresses security selection, preservation of principal, and compounding of the income stream as the key to consistently adding value in the bond market.
Strategy Overview
- Intensive focus on security selection and credit analysis
- Attribution analysis shows that over time 40% of our excess return comes from security selection, 40% from sector allocation and 20% from yield curve (duration).
Investment Philosophy
Chartwell’s approach to investing is grounded in fundamental research. We believe we can provide excess returns by investing in credits we have thoroughly researched and understand. As bond investors, we think there are three risks when investing in credit:
- business risk
- liquidity risk
- convenant risk
Our goal is to fully understand these risks and then apply relative value screens as well as a top-down macro-overlay to identify favorable investment opportunities.
Key Facts (as of 12.31.2024)
| Strategy Inception | March 1, 2015 |
| Benchmark | Bloomberg 1-3 Yr. Credit Index |
| Investment Vehicles | Separate Account |
| Range of Holdings (Issuers) | 50-60 |
| Total Net Assets | $107M |
| Annualized Turnover | 38.4% |
| Yield to Maturity | 4.74% |
| Effective Duration | 1.68 yrs. |
| Average Quality | A1 |
Bloomberg 1-3 Year Credit Index measures the performance of investment grade corporate debt and sovereign, supranational, local authority, and non-U.S. agency bonds that have a remaining maturity of at least one year and less than three years. An investment cannot be made directly in an index.
Bloomberg Fixed Income Indices (the “Indices”) are trademarks or service marks of Bloomberg Finance L.P. Bloomberg Finance L.P. and its affiliates, including Bloomberg Index Services Limited, the administrator of the Indices (collectively, “Bloomberg”) or Bloombergʼs licensors own all proprietary rights in the Indices. Bloomberg does not guarantee the timeliness, accuracy or completeness of any data or information relating to the Indices.
Core Fixed Income Investment Team
Risk Considerations: Historically, bonds have indeed provided less volatility and less risk of loss of capital than has equity investing. However, there are many factors which may affect the risk and return profile of a fixed income portfolio. The two most prominent factors are interest-rate movements and the creditworthiness of the bond issuer. Generally, when interest rates rise, bond prices fall and when interest rates fall, bond prices generally rise. The risk of a change in the market value of the investment due to changes in interest rates is known as interest-rate risk. Interest-rate risk is subject to many variables but may be analyzed based on various data (e.g., effective duration). The risk that the issuer may default on interest and/or principal payments is often referred to as credit risk. Credit risk is typically measured by ratings issued by ratings agencies such as Moody’s and Standard & Poor’s. A credit rating of a security is not a recommendation to buy, sell or hold the security and may be subject to review, revision, suspension, reduction or withdrawal at any time by the assigning Rating Agency. Ratings and insurance do not remove market risk since they do not guarantee the market value of the bond. Bonds issued by the U.S. Government have significantly less risk of default than those issued by corporations and municipalities. However, the overall return on Government bonds tends to be less than these other types of fixed-income securities. Finally, reinvestment risk is the possibility that the proceeds of a maturing investment must be invested in a lower yielding security, all other things held constant, due to changes in the interest-rate environment. Investors should pay careful attention to the types of fixed-income securities which comprise their portfolio, and remember that, as with all investments, there is the risk of the loss of capital. Mortgage-backed securities (MBS) are subject to scheduled and unscheduled principal payments as homeowners pay down or prepay their mortgages. As a result, the effective maturity of a mortgage-backed security is virtually always shorter than its stated maturity. Asset-backed securities and mortgage-backed securities are created by pooling loans from a variety of sources and issuing bonds which are backed by these loans. Creditworthiness stems from the credit quality of the underlying loans, as opposed to corporate bonds in which creditworthiness is derived from the earning power of the issuing company. The primary risk of these securities is interest-rate risk. Rising interest rates might cause loan principal prepayments to slow, resulting in less available principal to invest at prevailing higher rates. Conversely, rate decreases might accelerate prepayments, leaving more dollars to invest at lower rates.