Payden & Rygel at a Glance | |||||
|
|
|
For four decades, our independence has enabled us to manage portfolios focused on our clients' objectives. We build lasting relationships by providing an unparalleled level of service and problem solving.
With over $163.8 billion in assets under management, we advise the world's leading institutional and individual investors with real-world strategies on the global economy and capital markets. Investment management is our only business, and every client is important to us. Our clients include:
Corporations
|
Endowments, Foundations & Non-Profits
|
Health Care
|
||||||||||||||
Insurance Companies
|
Public Entities
|
High Net Worth Individuals
|
||||||||||||||
Payden & Rygel has been managing portfolios globally with an emphasis on customized investment solutions since inception. We believe that a one-size-fits-all or product-based approach to investing sacrifices the single most important aspect of our client relationships: each client's unique circumstances.
Some of the fastest growing regions in the world are labeled "emerging markets". For many years, investors treated emerging markets as an alternative investment. Today, emerging marketsand in particular, emerging market bondsare an exciting asset class all their own. They offer the opportunity to invest in almost seventy countries that represent close to half of global output. Payden & Rygel's Emerging Market Bond strategies can be used as stand-alone investment vehicles or they can used in a broader portfolio to provide diversification and potentially enhance returns.
The firm's investment process starts with a top-down assessment of country risk, accompanied by research trips to countries in Latin America, Europe, Asia, Africa and the Middle East. We assess country trajectories through a screening of their macroeconomic variables, business environment, political stability, and the quality of their environmental, social and government institutions. Our robust relative value and risk management tools help to ensure diversification and minimize volatility.
Payden & Rygel's emerging market bond effort dates back to the late 1990s, making us a pioneer in the asset class. The stability of our team and consistency of our approach has delivered strong absolute and risk-adjusted returns for our clients. Beyond the firm's capabilities in sovereign U.S. dollar and euro-denominated bonds, we have been at the forefront of the evolution of local currency and corporate bond markets. We offer both dedicated and blended strategies across the full range of emerging market debt opportunities.
Benchmark | J.P. Morgan EMBI Global Diversified Index |
Securities Employed | Sovereign and corporate bonds of emerging-market countries |
Maturity Range | 1 - 30 years |
Duration Range | 5.0 - 7.0 years |
Average Credit Quality | BBB- |
The value of fixed income portfolios will rise and fall due to changes in interest rates and other economic factors. Investment portfolios could lose principal.
Payden & Rygel is a pioneer in developing cash management strategies for institutions, which we began more than a quarter-century ago. Since then, this strategy, which focuses on liquidity management of operating funds or sweep funds, has been refined and enhanced. Our strategy helps institutions maximize the return on short-term resources by deploying funds in the short-term money marketswhere they maintain a high degree of security and liquidity. The money markets include short-term debt securities like commercial paper, negotiable certificates of deposit and U.S. Treasury billsall with maturities of less than a year, but usually less than 90 days. Expert navigation of the vast money markets is essential to successfully managing short-term cash.
The value of fixed income portfolios will rise and fall due to changes in interest rates and other economic factors. Investment portfolios could lose principal.
Payden & Rygel pioneered cash management strategies for institutions over four decades ago. Since that time, our short-term bond strategies, which initially focused on liquidity management of operating funds or sweep funds, have expanded to meet the dynamic needs of our clients and the ever-changing investment landscape.
Our short-term bond strategies are designed for investors who seek higher yields than those provided by money market funds but can withstand varying amounts of incremental price volatility. Customized to meet the unique investment objectives of each client, the firm's short-term bond strategies offer a high quality, diversified alternative to money market funds and other short-term investments.
Today, Payden & Rygel's short-term bond strategies generally fall into three broad categories: enhanced cash, low duration, and low duration plus.
The enhanced cash strategy offers a higher yielding alternative to short-term investments such as money market funds and bank certificates of deposit. Short-maturity government securities and non-government securities such as corporate bonds, asset-backed and mortgage-backed securities are utilized to provide potentially higher yields than money market funds while seeking to achieve a comparable level of principal stability.
Benchmark | 3-Month, 6-Month, and 1-Year U.S. Treasury Bill Indices, Money Market Funds |
Securities Employed | Government, mortgage-backed, asset-backed, and corporate securities, and commercial paper. |
Maturity Range | 0 - 5 years |
Duration Range | 0.25 - 1.5 years |
Average Credit Quality | AA |
The low duration strategy is an alternative to cash and short-term bank deposits, designed for investors seeking higher yields than generally available from money market funds, and who are slightly more tolerant of principal fluctuation. The portfolio structure is based upon a client's liquidity requirements. Typical clients include corporate operating funds, construction funds, hedge funds, university operating funds, pension funds, central banks, foundations/endowments, public funds and individuals.
Low duration investments range from money markets, asset- and mortgage-backed securities, corporate bonds, U.S., and international securities.
Benchmark | ICE BofA 1-3 Year and 1-5 Year US Treasury Indices or ICE BofA 1-3 Year and 1-5 Year Government/Corporate Indices |
Securities Employed | Government, mortgage-backed, asset-backed, and corporate securities. |
Maturity Range | 0 - 5 years |
Duration Range | 1.5 - 2.5 years |
Average Credit Quality | AA |
The low duration plus strategy is designed for investors who seek a potentially higher return than that available from a pure low duration strategy and who can withstand a moderate amount of principal fluctuation. While this strategy employs the same type of securities as the low duration strategy (e.g., short maturity government and non-government securities, including corporate bonds, asset-backed and mortgage-backed securities), it may also include investments with a slightly longer maturity and a lower credit quality. The overall portfolio maintains a similar credit quality to the low duration strategy.
Benchmark | ICE BofA 1-3 Year and 1-5 Year US Treasury Indices or ICE BofA 1-3 Year and 1-5 Year Government/Corporate Indices |
Securities Employed | Government, mortgage-backed, asset-backed, and corporate securities. |
Maturity Range | 0 - 7 years |
Duration Range | 1.5 - 3.5 years |
Average Credit Quality | AA |
The value of fixed income portfolios will rise and fall due to changes in interest rates and other economic factors. Investment portfolios could lose principal.
Payden & Rygel believes that bonds play a special and important role in an overall asset allocation by generating reliable current income and by providing a diversification benefit to other higher volatility assets in the portfolio. We strive to act as a requisite diversifier in the context of the total pension plan.
With the ever-increasing blurring between asset classes, we expect to deliver return and volatility characteristics in keeping with the spirit of bond expectations. We believe that bond portfolios should be sufficiently diversified across a broad spectrum of sectors and that individual position sizes in the portfolio should be calibrated to their potential degree of risk.
In addition to the strategies listed below, we offer a complete array of services including index replication strategies and liability-driven investing.
The intermediate core bond strategy strikes a compromise between yield on the one hand and price volatility on the other. This strategy offers a slightly lower yield than other core bond alternatives due to its shorter average maturity that helps protect against adverse price moves in a rising interest rate environment. The strategy generally invests in securities with maturities in the one to 10-year range, and includes sectors such as U.S. Treasuries, agencies, investment-grade corporate bonds and asset-backed and mortgage-backed securities.
Benchmark | Bloomberg Intermediate U.S. Government/Credit Index, Bloomberg U.S. Intermediate Aggregate Bond Index |
Securities Employed | U.S. Treasury, agency, mortgage-backed, asset-backed, corporate, and non-dollar securities. |
Maturity Range | 4 - 6 years |
Duration Range | 2.9 - 4.5 years |
Average Credit Quality | AA- |
The core bond strategy exploits opportunities across maturities and sectors in the investment grade universe. The strategy generally invests in securities with maturities in the one to 30-year range and includes sectors such as U.S. Treasuries, agencies, investment-grade corporates and asset-backed and mortgage-backed securities.
Benchmark | Bloomberg U.S. Aggregate Bond Index |
Securities Employed | U.S. Treasury, agency, mortgage-backed, asset-backed, corporate, and non-dollar securities. |
Maturity Range | 1 - 30 years |
Duration Range | 3.0 - 5.5 years |
Average Credit Quality | AA- |
The core plus strategy combines sectors used in the core strategy with the extended markets of high-yield, emerging markets and non-dollar bonds. They are used opportunistically as market conditions warrant and may represent as little as zero percent of the portfolio, but a more typical allocation is in the 10-20% range. This strategy has grown steadily over the past several years, spurred by advancements in information technology, which have increased transparency and trading efficiencies in these sectors, and the dramatic increase of debt issuance in local markets around the world.
Benchmark | Bloomberg U.S. Aggregate Bond Index, Custom Indices |
Securities Employed | U.S. Treasury, agency, mortgage-backed, asset-backed, corporate, high-yield, and non-dollar securities. |
Maturity Range | 1 - 30 years |
Duration Range | 3.0 - 5.5 years |
Average Credit Quality | A |
The value of fixed income portfolios will rise and fall due to changes in interest rates and other economic factors. Investment portfolios could lose principal.
Our U.S. government bond strategy is a high quality, short to intermediate maturity strategy, for risk averse investors. The Fund is comprised of 100% U.S. government securities. The strategy focuses on U.S. Treasury securities, government agency debentures and agency mortgage securities with a weighted average life of one to five years. The strategy seeks to generate income without credit risk nor the volatility of longer maturity securities.
Benchmark | ICE BofA 1-5 Year US Treasury Index |
Securities Employed | U.S. Treasury securities, U.S. agency debentures, and U.S. agency mortgages |
Maturity Range | 1 - 10 years |
Duration Range | 1.75 - 3.25 years |
Average Credit Quality | Agency |
The value of fixed income portfolios will rise and fall due to changes in interest rates and other economic factors. Investment portfolios could lose principal.
Payden & Rygel's actively managed global fixed-income strategies provide broad access to the world's developed and emerging bond markets, both investment grade and high yield. We offer a wide range of standard and customized strategies designed to meet clients' unique objectives across countries, currencies and sectors.
Three pillars drive portfolio success: duration, currency and sector. We combine top-down asset allocation decisions with bottom-up security selection to gauge country selection, interest rate expectations, and currency and sector performance. Diversification across sectors and individual credits is a key component of our risk management philosophy.
The global fixed-income strategies aim to maximize total return in both rising and falling interest rate environments. Investing across global bond markets provides increased opportunities and additional diversification. Payden & Rygel uses a disciplined team approach to tailor portfolios for both hedged and unhedged mandates.
Benchmark | Bloomberg Global Aggregate Bond Index (USD Hedged), J.P. Morgan Global Government Bond Index, FTSE World Government Bond Index |
Securities Employed | Government, agency, corporate, and collateralized securities, and Yankees |
Maturity Range | 0 - 30 years |
Duration Range | 5.0 - 7.0 years |
Average Credit Quality | AAA / AA |
A global short/intermediate strategy, which utilizes global sovereign bonds and credit instruments to provide a diversified investment portfolio with maturities ranging from one to five years, can be hedged to any local currency.
Benchmark | FTSE World Government Bond Index 1-3 Year, ICE BofA 1-3 Year US Treasury Index |
Securities Employed | Government, agency, corporate, and collateralized securities, and Yankees |
Maturity Range | 0 - 5 years |
Duration Range | 1.0 - 3.0 years |
Average Credit Quality | AAA / AA |
The value of fixed income portfolios will rise and fall due to changes in interest rates and other economic factors. Investment portfolios could lose principal.
Payden & Rygel's high-yield bond strategy seeks to maximize total return by focusing on the upper tier of the high-yield bond market. High-yield bonds can provide diversification and yield benefits to an investment portfolio due to their low correlation with both U.S. Treasuries and investment-grade corporate bonds.
The cornerstone of Payden & Rygel's high-yield strategy is its intensive credit due diligence. With an experienced portfolio manager and a seasoned analyst team, Payden & Rygel successfully navigated the credit market turmoil in both 2007 and 2008. The firm prides itself on its risk controls and risk discipline.
We consider all companies which have bonds above $200 million in issue size. Our investible universe consists of in excess of 620 companies, though 245 of these are between $200-$300 million in issue size. These 245 companies often provide the best value and are "below the radar" of many managers. This allows us to focus on more "undiscovered gems" than the typical high-yield manager.
Benchmark | ICE BofA BB-B US Cash Pay High Yield Constrained Index |
Securities Employed | High-yield bonds |
Maturity Range | 1 - 10 years |
Duration Range | 4.0 - 5.0 years |
Average Credit Quality | BB- |
The value of fixed income portfolios will rise and fall due to changes in interest rates and other economic factors. Investment portfolios could lose principal.
Tax-exempt bonds (e.g., municipal bonds) should be a significant holding in a fixed-income strategy for taxable investors. Payden & Rygel's tax-sensitive strategies seek to maximize after-tax total return and are customized to meet the unique investment objectives of each client as well as clients' tax status and state of domicile.
We believe that superior performance is derived through the inclusion of both taxable and tax-exempt securities in the portfolio opportunity set. The segmented nature of the municipal (tax-exempt) market leads to inefficiencies that can translate into excess returns for those managers with the experience, sophistication and flexibility to capitalize on these opportunities. We believe municipal investing requires elements of both a top-down, as well as bottom-up, investment style. Market surveillance plays a critical role in the municipal market given the significant influence that supply and demand imbalances exert on performance.
Short-term tax-sensitive strategies seek to earn higher income than money market alternatives while preserving capital. Short-maturity municipal bonds as well as U.S. Treasury, agency, corporate, and asset-backed bonds may be used.
Benchmark | Bloomberg 1-Year Municipal Index, Custom Indicies |
Securities Employed | Municipal bond (revenue, general obligation, etc.), government, corporate bond, and asset-backed securities. |
Maturity Range | 0 - 5 years |
Duration Range | 0.5 - 2.5 years |
Average Credit Quality | AA+ |
The intermediate tax-sensitive strategy is a core portfolio strategy. The intermediate maturities along the yield curve provide a large portion of the return of longer securities with a fraction of the price volatility. The portfolios are tailored to meet each client's unique investment goals and tolerance for risk and can be customized to emphasize in-state tax benefits where appropriate.
Benchmark | Bloomberg 1-10 Year Municipal Index |
Securities Employed | Municipal bond (revenue, general obligation, etc.), government, mortgage, and corporate bond securities. |
Maturity Range | 1 - 25 years |
Duration Range | 3.5 - 5.5 years |
Average Credit Quality | AA+ |
The long-term tax-sensitive strategy is designed for investors who may have long-term liabilities against which they are managing their assets or those with a more income oriented focus. The strategy generally invests in securities across the entire maturity spectrum, and includes sectors such as government securities and mortgage-backed securities in addition to traditional municipal securities.
Benchmark | Bloomberg 10-Year Municipal Index |
Securities Employed | Municipal bond (revenue, general obligation, etc.), government, mortgage, and corporate bond securities. |
Maturity Range | 1 - 40 years |
Duration Range | 5.0 - 7.0 years |
Average Credit Quality | AA |
The value of fixed income portfolios will rise and fall due to changes in interest rates and other economic factors. Investment portfolios could lose principal.
Strategic Income has its roots in core fixed income but expands from there in a more comprehensive and opportunistic fashion. It is designed as a more "open architecture" approach that is less conforming to traditional fixed-income benchmarks.
This approach has gained favor from investors who recognize that there should not be a "one size fits all approach to core style portfolios. Clients have many different degrees of liquidity needs and beta exposure desires and strategic income in the way we manage it at Payden & Rygel offers this degree of customization.
The strategy allocates to major credit sectors globally in a diversified fashion. Short term and/or high-quality government securities will also be used to 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. 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 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.
Benchmark | Targeted and rebalanced allocation to Bloomberg, ICE BofA, and J.P. Morgan indices representing sectors listed below |
Sectors Employed | Cash, government, investment-grade corporate, and high-yield, emerging-markets debt (U.S. dollar and local currency), and structured finance (commercial mortgage-backed, asset-backed, etc.) securities |
Maturity Range | 0 - 30 years |
Duration Range | 3.0 - 5.0 years (client dependent) |
Average Credit Quality | Investment Grade |
The value of fixed income portfolios will rise and fall due to changes in interest rates and other economic factors. Investment portfolios could lose principal.
Payden & Rygel's strategy is to purchase investment-grade corporate bonds of companies that have leading market positions, strong cash flow generation, stable management teams and predictable earnings. The strategy's focus is on bottom-up credit selection with an emphasis placed on adding issues with a near-term catalyst to outperform. Our credit research process looks to capitalize on opportunities in the corporate bond market across sectors and maturities; including the early identification of potential rising stars - companies that we believe will be upgraded to investment grade in the near term. A forward looking approach is taken to credit analysis. A priority is placed on assessing a company's future trajectory and the corresponding risk and opportunities for bondholders under various scenarios.
The strategy primarily invests in USD investment-grade corporate securities with flexibility to opportunistically invest in below investment-grade securities. The strategy may also utilize futures for duration management.
Benchmark | Bloomberg U.S. Corporate Investment Grade Index |
Securities Employed | Primarily invests in U.S. investment-grade corporate bond securities |
Maturity Range | 1 - 30 years |
Duration Range | 6 - 8 years |
Average Credit Quality | BBB |
The value of fixed income portfolios will rise and fall due to changes in interest rates and other economic factors. Investment portfolios could lose principal.
Payden & Rygel's investment philosophy for long-duration investing is that active management of fixed-income investments not only should focus on ways to add value relative to a benchmark, but should also focus on managing risk in its many forms (e.g., credit, liquidity, etc.) consistent with the letter and spirit of our clients' unique investment guidelines.
Our investment process is a hybrid - we manage a macro-driven top-down approach combined with a bottom-up fundamental view. The process begins with our Investment Policy Committee's assessment of the global macro-economic environment and formation of our broad-based and long-term view on interest rates (economic growth, inflation, political risk), credit (direction, strength, supply/demand), and risk (primarily focused on downside risk and client portfolio protection). The long duration investment team, based on discussions with the IPC and our sector strategists, will determine sector weightings and then populate these targets with individual issuers to achieve attractive risk-adjusted return expectations.
We maintain diversified portfolios, typically holding 200 bonds, in order to properly manage tracking error and we employ strong risk controls. Our long-duration investing strategy exploits opportunities in the longer end of the maturity curve, ten years and greater, across multiple fixed income. These sectors include U.S. Treasuries, agencies, global investment-grade corporate bonds, taxable municipal bonds, and investment-grade emerging-market sovereign and government related bonds. Plain vanilla interest rate swaps and interest rate futures will be used sparingly to manage the duration of the portfolio. Additionally, we invest in sub-investment-grade bonds up to 5% to increase income potential and diversify overall credit exposures.
Benchmark | Bloomberg Long Government/Credit Index |
Securities Employed | U.S. Treasury, U.S. agency debentures, corporate bond, government-related debt, and U.S. agency mortgage-backed securities |
Maturity Range | 10 years +, select 1-10 holdings |
Duration Range | 13.0 - 16.5 years |
Average Credit Quality | AA- |
The value of fixed income portfolios will rise and fall due to changes in interest rates and other economic factors. Investment portfolios could lose principal.
Payden & Rygel's large-cap value/equity income strategy takes advantage of the firm's strengths in company and industry analysis, focusing on companies which are projected to maintain or increase their dividend payouts while providing above-market-average dividend yields. Our objective is to provide current income and equity market participation through a well-diversified, high-quality, large-cap portfolio by focusing on companies with steady earnings and cash flow growth. Our equity team looks beyond the common stock universe for attractive dividend/distribution yields, and researches other areas such as preferred stock, real estate investment trusts, master limited partnerships, and business development companies.
The strategy is well-diversified across sectors and equity security types, and generally invests in 50-80 holdings. With the focus on diversification, income and equity market participation, this strategy is appropriate for both investors focusing on income and those looking for a competitive large-cap value offering with lower volatility and attractive risk-adjusted returns.
Stocks in this strategy will generally appreciate less when the overall market is rising and fall less when the overall market is declining. Investors could lose money during periods of falling stock prices.
Produce Positive Returns | Staying true to the basic definition of "Absolute Return", our strategy aims to produce positive returns over the long term, through different market environments. |
Protect Downside Risk | Before we consider the direction of markets or the value opportunities that are presented, our first responsibility is to protect an investor's principal against the potential for loss. Risk management is paramount. |
Capture "Smart" Yield | Benefitting from more than 40 years in fixed income management, the foundation of our strategy is a low duration fixed income portfolio where risk premia from global interest rate curves and credit markets may provide dependable and repeatable returns. |
Securities Employed | Cash, government, investment-grade corporates, high-yield, emerging-markets debt, structured finance (commercial mortgage-backed, asset-backed, etc.) securities |
Average Credit Quality | Investment Grade |
Currency | Client specified ($, €, £, ¥, A$, etc.) |
Track Record Length | Since 2008 |
Payden & Rygel's global balanced strategy is designed to help investors meet their financial goals and objectives via a strategic allocation of stocks, bonds and cash.
Country and sector allocations are carefully determined via a top-down approach based on fundamental and quantitative analysis. The correlation between countries is critical to measure appropriate levels of diversification. We utilize futures contracts to implement strategic allocation shifts. High liquidity and low transaction costs are added benefits to Payden & Rygel's proven approach.
Payden & Rygel's U.S. balanced portfolio is designed to help clients achieve their financial objectives via a diversified list of U.S. stocks, bonds and cash. The firm can manage mandates for a relative return or absolute return objective.
A portfolio of stocks and bonds is determined using a selection process which considers fundamental economic analysis, valuation measures for stocks and bonds, global asset flows, technical analysis, and overall client goals and objectives. While we utilize extensive quantitative analysis, common sense and good judgment are also key components of our selection process. The strategy generally makes one to four shifts per year, usually changing the allocation mix in five to ten percent increments.
We regularly publish articles and information on timely investment topics, economic and market trends, investment products and issues impacting global financial markets. The firm is dedicated to comprehensive, independent research and analysis. Find proprietary insights, analysis, and the latest on markets trends.
Join others who are reading the Point of View's thought provoking articles
333 South Grand Avenue
39th Floor
Los Angeles, CA 90071
welcome@payden.com
213 625-1900
265 Franklin Street
Suite 1604
Boston, MA 02110
welcome@payden.com
617 807-1990
1 Bartholomew Lane
London EC2N 2AX
United Kingdom
welcome@payden.com
+44 20 7621 3000
Corso Matteotti 1,
20121
Milan, Italy
benvenuto@payden.com
+39 02 76067111