Our
Strategic Income strategy allocates to major credit sectors globally in a diversified fashion. Cash and high-quality governments exposures ensure liquidity and ease of strategy change, as well as potentially providing a "safe haven" in times of major credit stress. Active rotation among the sectors follows Payden's time-tested macro view through its Investment Policy Committee and coordination with our Core fixed income team.
Target (neutral) allocations to sectors are client-specific, depending on risk and liquidity tolerances. The Payden style of "bonds behaving like bonds should" is not lost in Strategic Income portfolios - our focus is on cash bonds and not derivative and pair strategies that can obfuscate risk and return sources.
Importantly effective (interest rate) duration may be empirically lower than traditional "core" portfolio durations given the strategic allocations to credit sectors and resulting higher income cushion. Moreover, for separate account clients, Payden can overlay duration hedges to mitigate duration risk further.
Strategic Income uses may include:
- Client Second- or third-tier liquidity pools not wanting high market beta but can accept credit market volatility in place of higher income
- University, hospital, other bond proceeds
- Supplement to, or replacement of, traditional "aggregate" fixed income portfolios
