Philosophy & Process Reams' intermediate fixed income philosophy is identical to that of our core plus and core portfolios as we seek to consistently outperform the bond market with duration management and a bond selection process that uncovers unique opportunities. However, we attempt to accomplish our goal within the maturity constraints of an intermediate maturity mandate. We actively manage the duration of the portfolio by determining whether the bond market is cheap or expensive. We make this determination by comparing real (inflation-adjusted) interest rates available in the market to historical real interest rates. When current real rates are relatively high, portfolio duration will be lengthened above benchmark levels and when current real rates are below historical levels, portfolio duration is positioned below that of the benchmark. Yield-curve exposure is determined by comparing the current difference between 2-year and 30-year Treasury yields (the "yield-curve spread") to historical norms and gradually increasing the bulleted or barbelled configuration of the portfolio as the "yield-curve spread" moves below or above normal levels. Once we set our market strategy, we turn our attention to selecting the most attractive bonds for the portfolio. We approach bond selection with several important assumptions. First, we believe that most bond investors pay a premium for yield. Therefore, we focus on the portfolio's total return rather than simply building yield into portfolios. We also believe that the bond market is inherently volatile and we, therefore, purchase securities that outperform in a volatile interest rate environment. Finally, we have a bias toward unique securities that are often mispriced, such as well-structured mortgage-backed securities, asset-backed issues, and secured and senior debt. After subjecting all bonds under consideration to an in-depth scenario analysis, the portfolio managers select those bonds with the highest risk-adjusted return. | Company Profile | Investment Professionals | Fixed Income Products | Quarterly Review |  | Client Account Access | Contact Information | Home | © Reams Asset Management Company. Terms of Use/Legal Issues