Ultra Short Duration

Philosophy

The team views the Ultra Short Duration strategy as an extension of the money market sector, offering the potential for additional returns in exchange for a modest degree of price volatility. Its buy and hold approach produces a portfolio with significant first-year cash flows, and an overriding goal to maximize reinvestment opportunities and reduce price volatility. Fort Washington’s multi-sector strategy emphasizes structured products - which historically have produced high alpha and Sharpe ratios through interest rate and credit cycles. The strategy leverages the firm’s sector specialists as well as advanced evaluation and risk management capabilities in these increasingly complex markets.

Process

Fort Washington employs a disciplined investment process designed to maximize risk-adjusted returns using a broad range of fixed income strategies.  Management maintains a strategic sector allocation model which is updated over a period of years (3-5 years).  Tactical sector allocations are updated monthly using a data-driven approach combined with strong inter-sector communication to uncover relative value opportunities over the short term in a variety of asset classes.  A proprietary risk budget model is also used to assist in determining investment strategy.  

  • Targets goals through a short duration, low-risk approach
  • Emphasizes mortgage-backed and asset-backed securities, which are generally backed by income-producing assets; inefficiencies in these markets make them attractive for active management
  • Seeks to keep duration less than a year, which reduces interest rate risk compared to longer duration portfolios
  • Higher credit quality portfolio seeks to avoid higher risk strategies, such as non-dollar currencies and lower quality credits.

Objective  

The Ultra Short strategy seeks maximum total return consistent with the preservation of capital by primarily investing in a diversified portfolio of securities of different maturities, including U.S. Treasury securities, U.S. government agency and U.S. government-sponsored enterprise securities, corporate bonds, mortgage-backed securities, commercial mortgage backed securities, asset backed securities, municipal bonds and cash equivalent securities. While the strategy may invest in securities with any maturity or duration, interest rate risk is managed by maintaining an effective duration of one year or less under normal market conditions. 

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Strategy Commentary 

Strategy Snapshot

  • Higher quality, high cash flow bonds with emphasis on liquidity premium
  • Buy and hold approach with an emphasis on structured securities
  • Stability of management team
  • 20+ year track record 

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