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Fixed Income Strategy

Strategy Dynamics

The Tone Capital Fixed Income Strategy seeks capital preservation and income generation by selecting bond ETFs from a universe encompassing short, intermediate, and long-term corporate and government issues, as well as inflation protected assets. The portfolio employs a tactical allocation rotation methodology, examining momentum, risk, and volatility factors and allocates to the highest ranked securities in the universe at each potential re-balance on one month intervals. If momentum and risk factors indicate a more conservative stance is warranted, a portion or all of the portfolio may move to cash seeking to preserve capital.

Characteristics

The FIXED INCOME STRATEGY is a modeled momemtum-based strategy that seeks to outperform the Barclays Aggregate Bond Index while providing safety and decreased volatility.

  • Tactical allocation strategy
  • Investment horizon: long-term
  • Rules-based investment process
  • Disciplined model-directed trading
  • Rebalance frequency: monthly

The Barclays Aggregate Bond Index is a market value-weighted index that tracks the daily price, coupon, pay-downs, and total return performance of fixed-rate, publicly placed, dollar-denominated, and nonconvertible investment grade debt issues with at least $250 million par amount outstanding and with at least one year to final maturity. An investment cannot be made directly in an index.

The Investment Process

According to industry research, asset allocation accounts for 88% of investment returns in a diversified portfolio (Source: Vanguard). Tone Capital’s Fixed Income Strategy adjusts investment allocations per proprietary factors based on durable investment themes, providing a dynamic solution designed to avoid the pitfalls of buy and hold investing. A monthly rebalance frequency is employed, seeking to capture the nuance of macro shifts.

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