Value Short Duration
Investment Objective
The Value Short Duration strategy seeks long-term total return consistent with the preservation of capital.
Description
The strategy uses a value-driven approach and seeks to generate return by investing in a portfolio of investment grade, fixed income securities. Income is especially important in managing a short duration mandate, and our investment objective is to balance the goals of stability of capital and total return.
The strategy seeks to add value by capitalizing on imbalances in the relationships among sectors and individual bonds. We believe that investing in undervalued sectors and bonds and selling expensive ones using a relative value assessment is the ideal process to capture value.
The strategy typically invests in US dollar-denominated fixed income securities including governments, corporate bonds, securitized bonds, sovereign and supranational entities, as well as municipal bonds. The strategy is duration neutral, meaning that portfolio duration is set in an attempt to meet client objectives and does not incorporate forecasts or speculation. There is no exposure to currency risk, high yield bonds or emerging market debt.
Management Team
The US Multi-Sector Fixed Income team is made up of several New York based portfolio managers dedicated to value-oriented fixed income investing, and are supported by an experienced team of more than 30 global credit analysts, with geographical and industry expertise.
Andrew B.J. Chorlton, CFA
Andrew Chorlton is Head of US Multi-Sector Fixed Income, based in New York. He leads the team responsible for all multi-sector strategies, including core, long duration, short duration and tax-aware strategies. Andy joined Schroders in 2013 following the acquisition of STW Fixed Income Management, where he had worked since 2007.
Andrew B.J. Chorlton, CFA
Andrew Chorlton is Head of US Multi-Sector Fixed Income, based in New York. He leads the team responsible for all multi-sector strategies, including core, long duration, short duration and tax-aware strategies. Andy joined Schroders in 2013 following the acquisition of STW Fixed Income Management, where he had worked since 2007.
Edward H. Jewett
Edward Jewett is a Portfolio Manager on the US Multi-Sector Fixed Income team. Todd joined Schroders in 2013 following the acquisition of STW Fixed Income Management, where he had worked since 1988. At STW, Todd was Principal, Portfolio Manager and a member of the team responsible for managing multi-sector portfolios including core, long duration, short duration and tax-aware strategies.
Edward H. Jewett
Edward Jewett is a Portfolio Manager on the US Multi-Sector Fixed Income team. Todd joined Schroders in 2013 following the acquisition of STW Fixed Income Management, where he had worked since 1988. At STW, Todd was Principal, Portfolio Manager and a member of the team responsible for managing multi-sector portfolios including core, long duration, short duration and tax-aware strategies.
Richard A. Rezek Jr., CFA
Richard Rezek Jr. is a Portfolio Manager on the US Multi-Sector Fixed Income team and a US Investment Grade corporate specialist, based in New York. Rick joined Schroders in 2013, following the acquisition of STW, where he had worked since 2002 as a Fixed Income Portfolio Manager. Prior to STW, Rick spent seven years as Vice President and Portfolio Manager at Loomis Sayles.
Richard A. Rezek Jr., CFA
Richard Rezek Jr. is a Portfolio Manager on the US Multi-Sector Fixed Income team and a US Investment Grade corporate specialist, based in New York. Rick joined Schroders in 2013, following the acquisition of STW, where he had worked since 2002 as a Fixed Income Portfolio Manager. Prior to STW, Rick spent seven years as Vice President and Portfolio Manager at Loomis Sayles.
Neil G. Sutherland, CFA
Neil Sutherland is a Portfolio Manager on the US Multi-Sector Fixed Income team, based in New York. Neil joined Schroders in 2013 following the acquisition of STW Fixed Income Management, where he had worked since 2008. Prior to that, Neil spent seven years at AXA Investment Managers, where he was the Senior Fixed Income Portfolio Manager responsible for credit and absolute return strategies.
Neil G. Sutherland, CFA
Neil Sutherland is a Portfolio Manager on the US Multi-Sector Fixed Income team, based in New York. Neil joined Schroders in 2013 following the acquisition of STW Fixed Income Management, where he had worked since 2008. Prior to that, Neil spent seven years at AXA Investment Managers, where he was the Senior Fixed Income Portfolio Manager responsible for credit and absolute return strategies.
Julio C. Bonilla, CFA
Julio Bonilla is a Portfolio Manager on the US Multi-Sector Fixed Income team, based in New York. He serves as a municipal bond specialist and joined Schroders in 2013 following the acquisition of STW, where he had worked since 2010. Previously, Julio spent ten years with Wells Capital Management, where he was instrumental in developing their municipal derivatives strategy.
Julio C. Bonilla, CFA
Julio Bonilla is a Portfolio Manager on the US Multi-Sector Fixed Income team, based in New York. He serves as a municipal bond specialist and joined Schroders in 2013 following the acquisition of STW, where he had worked since 2010. Previously, Julio spent ten years with Wells Capital Management, where he was instrumental in developing their municipal derivatives strategy.
Lisa M. Hornby, CFA
Lisa M. Hornby is a US Fixed Income Portfolio Manager. Lisa joined Schroders in 2010 and is based in New York. Prior to Schroders, she was a Securitized Products P&L Analyst at Barclays Capital from 2007.
Lisa M. Hornby, CFA
Lisa M. Hornby is a US Fixed Income Portfolio Manager. Lisa joined Schroders in 2010 and is based in New York. Prior to Schroders, she was a Securitized Products P&L Analyst at Barclays Capital from 2007.
Eric Lau
Eric Lau is a US Fixed Income Portfolio Manager. Eric joined Schroders in 2013 following the acquisition of STW Fixed Income Management, where he had worked since 2009.
Eric Lau
Eric Lau is a US Fixed Income Portfolio Manager. Eric joined Schroders in 2013 following the acquisition of STW Fixed Income Management, where he had worked since 2009.
Investment Philosophy
Major imbalances exist in the relationships between individual bonds or sectors and are caused by the ebb and flow of supply and demand, as well as sentiment and positioning. These are far more powerful factors in driving valuations than changes in fundamentals of investment-grade bonds. We believe these market anomalies can be exploited to generate returns.
We believe that undervalued bonds will outperform overvalued bonds and our strategy is focused on purchasing bonds that we believe are undervalued. When, in our view, bonds become fully priced, we seek to exchange them for better valued issues.
Investment Process
In our investment process, portfolio management and research are an integrated function performed by the portfolio management team. Portfolio managers also have access to a team of credit analysts, who follow a rigorous research framework that combines fundamental research and relative value assessment. Investment decisions are collaborative and are not made using a separate committee structure or by a portfolio manager in isolation.
Our investment process is based on three components:
- Sector and security inputs
- Credit research
- Portfolio construction
Sector and security inputs
Relative value analysis is used to position and concentrate portfolios in what we view as the most undervalued securities within the most undervalued sectors. We analyze historical spread relationships among sectors and securities and also look at dynamics of supply and demand, and sentiment and positioning driving valuations.
Broad sector and industry research determines whether an area of the market is under pressure for valid reasons or is truly under or over priced relative to fundamentals. The portfolio manager’s direct interaction with the market is key in judging the supply, demand and/or other technical and temporary factors that drive price anomalies in the market.
The process does not manage overweight/underweight positions relative to the benchmark. A security’s inclusion or exclusion from the index has no effect on our decision process or willingness to invest in a bond or sector.
Credit research
Securities within the investment-grade universe that meet individual valuation considerations and fit the desired portfolio structure requirements receive special scrutiny by portfolio managers performing fundamental research analysis.
Portfolio managers are also supported by our global team of more than 30 fundamental credit analysts, dedicated to fixed income corporate and municipal credit research. Analysts perform detailed credit, issuer and industry research on thousands of debt issuers worldwide.
Portfolio construction
There are two concurrent processes within portfolio construction: 1) individual issuer preference, which brings together sector and security inputs and credit research to select bonds and 2) portfolio design, which builds portfolios to have the appropriate attributes in line with our views.
I. Individual issuer preference
- Review general level of yield spreads and technical market factors
- Review spreads of individual bonds relative to Treasuries, swaps and to one another
- Eliminate from immediate consideration bonds that we view as expensive or of apparently ordinary value
- Apply credit research to each issuer and issue that meets initial criteria to be considered undervalued
- Develop an informal hierarchy among bonds that we view as undervalued enough to include in the portfolios
II. Portfolio construction and design
Determine desired portfolio characteristics from a fundamental investment point of view. Characteristics include:
- Guideline compliance
- Interest rate duration and spread duration relative to the benchmark
- Sector exposures
- Yield curve positioning
- Yield
Portfolios are tested for variations from policy and guidelines, and if portfolios are outside of targets, the team decides to either adjust targets or adjust portfolio positioning.
These two simultaneous processes are equally important and mutually dependent.
Key Features
- Value-driven, opportunity-based investment process
- Strategy focuses on income, capital preservation and total return
- Portfolio of investment grade bonds only, with no interest rate forecasting or currency speculations
- Investments are chosen based on relative value without reference to qualitative content of the benchmark
- Sector allocation and security selection are the main sources of generating return
- Daily interaction among key decision makers to evaluate opportunities and relative value
Literature
Investment Options*
- Mutual Fund
- Separate Accounts