Diversified Income Strategies

 

Objective	This strategy seeks a higher long-term total rate of return by taking advantage of the wide range of income producing securities in the market.  We accomplish this by combining investment grade bonds with real estate investment trusts, high yield and crossover securities, preferred stock, convertibles, and inflation linked bonds.  The higher risk investments are added only when they can produce sufficient additional income to minimize the volatility inherent in the price of these securities.  The objective is to overweight the portfolio in the most undervalued securities and sectors in the fixed income market and earn the highest risk-adjusted return.
Management Style	Using fundamental relative value analysis, Sovereign Advisers invests in sectors and individual credits that could potentially outperform the overall fixed income market over a 1-3 year period.  The analysis takes into account the impact of major changes in the shape and level of the yield curve in order to manage price volatility and maximize the total return on the portfolio.  Excess return can be generated from higher level of income, strategic sector allocation, individual credit selection, tactical trading opportunities, and active duration management.
Maturity/Duration	Average maturity is 5-10 years, and the average duration is 3-6 years.
Benchmark	Merrill Lynch Domestic Master  The goal of the Diversified Income Strategy is to outperform the Merrill Lynch Domestic Master over a 3-5 year time period.
Quality	The overall quality of the portfolio is normally investment grade.  When it appears that attractive investment opportunities exist and are supported by our quantitative analytics, we will add some alternative securities in those situations that are at or near historic yield spreads, or are at levels that are inherently attractive under present market conditions.  When excess return is available, it is our intention to add the most attractive high yield securities and other income producing securities to the portfolio.
Primary Sectors	Corporate bonds, U.S. Treasury and Federal Agency issues, Mortgage-back securities, Preferred Stocks, High Yield issues, Closed-End Funds, Inflation-linked notes, REIT, Convertible bonds and other attractive income producing securities.