Description
Atlantic’s Short Duration portfolios are actively managed and diversified across government, mortgage, corporate, and asset backed securities. This strategy seeks excess return over money market funds, while limiting interest rate risk by maintaining duration to 2 years or less. Atlantic also manages credit risk by maintaining an average credit quality of A or better.
Philosophy
Atlantic believes a consistent and material increase in return exists for a modest extension of maturity beyond the money market. In addition, Atlantic believes careful security selection can add a substantial return advantage without increasing volatility.
Investment Process
Portfolios are structured to attempt to obtain higher yields than traditional money market vehicles by modestly extending maturities and fully diversifying portfolios across multiple sectors of the investment grade bond market. Portfolios are also managed to ensure that clients’ liquidity needs can be readily met.
Duration Management
Interest rate risk is managed by limiting portfolio duration to 2 years or less. Atlantic utilizes a proprietary, quantitatively based econometric model to opportunistically adjust the duration of the portfolio within a controlled range.
Sector Selection
Portfolios are fully diversified with high quality, short maturity bonds across several sectors of the bond market. Treasuries or cash equivalents are used for liquidity and duration management and typically constitute 10-25% of the portfolio. Agencies, mortgages, corporates and asset backed securities are expected to provide return enhancement and typically constitute about 80% of the portfolio.
Security Selection
Atlantic’s sector specialists employ fundamental and quantitative security analysis with the objective of building well diversified portfolios of attractively valued securities while carefully limiting risk exposures.
Research
In addition to dedicated sector specialists, Atlantic has a research team focused on quantitative and market research (including three PhDs). This group provides extensive quantitative product support and plays an active role in product innovation. Atlantic believes this commitment to R&D translates to better product design and ultimately, higher excess return.
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Benchmark
Atlantic uses various short maturity benchmarks such as the 3-month LIBOR and the Merrill Lynch 1-3 Year Treasury Index.
Minimum Account Size
Separate account: $10,000,000, which may be changed at Atlantic’s discretion.
Commingled Fund: $1,000,000, which may be changed at Atlantic’s discretion.
In addition to the product featured herein, Atlantic’s affiliate, Fountain Capital Management, L.L.C., offers dedicated Short Duration High Yield portfolios.
Footnotes