Fixed-Income Investment Management

The Philadelphia Trust Company’s fixed income management objective is to generate a superior rate of return over time by investing in a portfolio of various fixed-income instruments including, but not limited to, U.S. Treasuries, Agencies, Corporates, Municipals, Mortgage-Backed Instruments, Convertible Bonds and Cash Equivalents. The goal is to outperform the market in all environments by the judicious selection and trading of fixed-income securities, based on analysis of domestic and international economic and political data.

The critical component in the investment process is selecting the most attractive sector of the yield curve to minimize price risk and provide the best possible return. Thus, interest rate forecasting and analysis of the current yield curve play a vital role in the selection process to determine the most appropriate portfolio maturity structure and average duration.

Credit analysis and changing industry/sector yield spread relationships are also important tools and are utilized to enhance asset returns.

Intelligence from outside economists, in the corporate, municipal and investment banking fields, is studied by our Interest Rate Committee. This review body is made up of the senior professionals responsible for corporate credit, economic and various fixed-income disciplines. The basic elements comprising the quarterly interest rates projection are financial indicators, i.e., interest rate movements, money market positions, cost of funds and government statistical releases.

The recommendations of the Interest Rate Committee are incorporated into the portfolio manager’s analysis of market trends used to determine maturity structure. A broad range of other factors are also considered by the managers to aid in determining quality and sector distributions. These include: client objectives, credit analysis, sector/quality spread analysis, call valuations, sinking fund valuation and opportunity/risk.

Specific investment decisions are formulated and executed by our senior portfolio managers. Transactions are made on a competitive or negotiated basis, depending on the nature of securities involved, depth of the inquiry, type of transactions, etc. Unlike “Management by Committee” this decentralized approach clearly defines responsibility and enables portfolio managers to quickly react to fundamental changes in the fixed-income investment outlook. This process permits the portfolio manager to sell or avoid purchasing issues before they are downgraded and buy issues before they are upgraded. This capability is essential for achieving good results in today’s volatile fixed-income markets.