Portfolio Objective
Our fixed income portfolio seeks a high level of current income and capital safety by investing in a diverse mix of high quality debt instruments. The portfolio’s risk and return characteristics are designed to be consistent with those of the Lehman Brothers Aggregate Bond Index.

Investment Philosophy
We employ a passive bond management strategy. This simply means we believe bond prices are fairly set in the market and focus instead on controlling the portfolio’s risk.

Historically, due to their fixed payment structures, bonds have offered lower risk than other investment vehicles such as equities. They are, however, by no means risk free. A variety of factors affects their performance, some severely, and all should be closely monitored and controlled.

Investment Process
We utilize a stratified sampling approach to align our portfolio’s characteristics with those of the benchmark’s in terms of maturity, coupon rate, credit risk, industrial representations, and issuer.

The benchmark’s members are numerous (over 5,000 bonds) and constantly changing due to new issues and maturities. We select a small subset of bonds, consistent with the needs of our clients, to capture the overall risk and return attributes of the benchmark while minimizing implementation costs.

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