Fixed Income

Investment Strategy for Fixed Income

We believe most clients choose fixed income investments (bonds) for risk reduction, income generation, or regulatory compliance purposes. Accordingly, we generally believe it is incongruous with those purposes to utilize fixed income strategies that carry significant risk. We believe that, over long periods of time, 90 percent of bond returns come from the income stream (i.e., yield), and intermediate maturity bonds (five- to ten-year maturities) usually provide approximately the same level of return as longer maturity (and riskier) bonds. Therefore, we focus on investment grade or near-investment grade corporate bonds with intermediate maturities. We also believe that strategies based on interest rate and yield curve slope forecasts are rather unreliable, so we minimize the use of such high risk strategies.

Fixed Income Goal and Objectives

Our fixed income portfolio goal is relatively simple and straightforward: To provide returns for our clients that exceed what they might otherwise achieve with core fixed income strategies. We use the Barclays Capital Aggregate Index as a benchmark against which we measure our performance.

The objectives that we pursue toward achievement of our fixed income goal include:

Generating an average yield-to-maturity that exceeds the Barclays Aggregate average
Maintaining an average duration that is similar to the Barclays Aggregate duration
Maintaining a significantly higher corporate bond allocation than that of the Barclays Aggregate
Assuming less credit risk than the market
Avoiding realized losses in our bond portfolios

Willis Investment Counsel

710 Green Street
Gainesville, GA 30501

Phone: 770.718.0706
Fax: 770.718.0805
www.wicinvest.com
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