We believe fixed income portfolios should produce superior returns with as little volatility as possible.

History has shown that the majority of the yield in taxable bond portfolios comes from securities with maturities of five years or less. Over time, longer-term bonds have generated slightly higher yields than shorter-term bonds, but have done so with significantly more risk.

As a result, we buy bonds with maximum maturities of five years to limit volatility, helping our clients to preserve assets and enjoy superior returns.

OUR TAXABLE BOND INVESTMENT PROCESS
 

  • Analyze the shape of the yield curve to determine whether to emphasize shorter or longer durations within our five-year maximum maturity scope
  • Purchase securities from large, highly-liquid markets for optimal flexibility and liquidity
  • Buy investment grade bonds (rated "A" or better by a major rating firm) to limit credit risk
  • Emphasize corporate bonds in our tax-exempt portfolios to enhance returns. Investment grade corporate bonds currently produce higher returns on a risk-adjusted basis than bonds of higher credit quality and similar maturity

TAXABLE BOND INVESTMENT STRATEGY

KKRA focuses exclusively on a taxable bond strategy that limits maturities to five years or less as it believes that there is ample evidence to suggest that this approach to debt management minimizes risk while producing competitive returns.

Our fixed income portfolios are comprised of highly marketable, investment-grade taxable securities with maturities of five years or less. Although portfolios are not identical, bonds of similar credit quality and maturity are selected for each client portfolio.

KKRA believes strongly that investors do not have to take the risk of investing in longer-term maturities, but rather can take less investment risk and achieve similar returns with shorter maturities by investing in issues with maturities of five years or less.

The portfolio characteristics of our investment process are shown below

CLIENT CONSTRAINTS CLIENT OBJECTIVES
Investment-Designated Assets Investment Return, Safety and Liquidity
 

PORTFOLIO DESIGN

Maturity No maturities longer than 5 years
Maturity Schedule Laddered and targeted to cash flow needs
Average Maturity 2-3 years
Sector Emphasis Corporate, government agency and taxable municipal bonds
Economic Sector Emphasis No Sector greater than 20% of the portfolio
Leverage No use of leverage
Currency No currency risk
Security Lending None


ISSUE CONSTRAINTS
Issue Quality "A" or better by Moody's or Standard & Poor's
Security Liquidity No non-marketable instruments
Diversification No issue greater than 5% of the portfolio


GENERAL
Asset Custodian Federally-chartered bank with superior custodial system
Communications Telephone, e-mail and in-person meetings
Reports Customized, hard copy or disk
Delivery of Reports Mail, overnight delivery, fax or e-mail
Guidelines Annually reviewed or updated when necessary