Payden & Rygel remains on the forefront of financial market developments and effectively deploys unique strategies to provide clients customized portfolio solutions. Alternative strategies range from securities lending cash
management to portable alpha
Investors often lend securities from their own porfolios out to other market participants. The cash available from this securities lending activity is often an overlooked asset. The Securities Lending Cash Management
strategy capitalizes on Payden’s quarter century of pioneering cash management strategies to better manage the cash collateral from securities lending programs, adding more value to an investment portfolio.
The Liability-Driven Investing
strategy constructs portfolios to better match the duration of long-term pension liabilities, rather than tracking a benchmark. The goal of this strategy is to hedge the effects of interest rates and inflation on the portfolio’s assets, in effect "immunizing" the portfolio. Traditionally, this was achieved using fixed-income securities. Today, Payden offers a second approach that employs derivatives such as interest rates swaps to increase efficiency and precision.
"Alpha" and "Beta" have become investment buzzwords in recent years. The Portable Alpha
strategy aims to generate returns that exceed an index return ("beta"). The term "alpha" represents that additional return the investor receives above an index return. Sources of "alpha" can include fixed-income, equity, and currency strategies.
"Beating a benchmark" can seem like an empty accomplishment when the benchmark itself is posting negative or sub-par returns – or the effects of inflation erase a portion of the gains. The Absolute Total Return
strategy allows investors to avoid such a concern. Portfolios are designed to produce a threshold total rate of return over time—regardless of how the overall market performs. For example, the objective could be the annual change in the consumer price index (CPI) + 4%, or a specific target rate of 8%. The total return benchmark is pursued regardless of market trends.
When the various asset classes of a pension plan, for example, move at different rates, or individual managers leave cash sitting idle, the plan’s objectives are not being met because the asset allocation has deviated from the target specified by the plan’s board. The Target Overlay
strategy employs a futures overlay to hurdle this problem and achieve the policy asset allocation target.
The Index Replication
strategy allows investors to choose their own target from a vast universe of global indexes. Cash securities (e.g., bonds) or derivatives-based solutions are employed to replicate the target index.