Investment Management

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Fixed Income Investments

   "The only function of economic forecasting is to make

astrology look respectable."    John Kenneth Galbraith

     We view fixed income (bonds) much in the same manner an orchestra views a base drum; provide a steady rhythm which will allow the rest of the orchestra to produce a melody.  A fixed income allocation, as part of a balanced portfolio, provides many investors with the comfort and discipline they need to be good equity investors as bonds can produce a consistent, predictable return. 

     To accomplish this task, we manage fixed income portfolios to find the greatest value rather than simply purchasing the highest yield or making violent shifts chasing after short term rate movements. A "laddered" portfolio within a limited maturity range will provide higher returns and expose the portfolio to less price volatility.

     The investment process we follow is similar to our "bottom-up" approach to equity selection in that the greatest value is obtained by emphasizing selection of individual issues as opposed to reacting to interest rate forecasts. Attempting to maximize fixed income returns by actively pursuing short-term interest rate movements leads to increased volatility and greater interest rate risk as positions are taken at the extremes of the yield curve. Purchasing undervalued or underpriced issues leads to more stable overall returns when interest rates rise and when they fall.

     We work with knowledgeable and experienced fixed income professionals having access to many bond dealers and offerings. They understand and seek the many individual subtleties and market conditions that may effect the pricing of a particular bond. 

   To address the question of credit risk, investment grade instruments with A or higher ratings are normally purchased for client fixed income portfolios. In general, the longer the maturity of the instrument the higher the rating demanded.

     Clients with taxable portfolios will often find the greatest after tax returns with municipal bonds. We attempt to diversify the portfolio amongst issuer and use, especially when high state and local tax regulations make the purchase of out-of-state issues unwise.

  For further information please mail at info@lichstrahl.com