Fixed Income Diversification with LODI

Uh so Loi is uh it's subadvised by SLC fixed income.

These are um institutional money managers who um manage a significant amount of money in the in that specific uh channel as far as fixed income markets go.

And from an interest rate risk standpoint, Loi, it's actually very simple.

So there's two major ways you know you're going to be able to essentially find value as far as an actively managed fixed income portfolio goes.

Duration management and then the the credit selection as far as the sector exposure of the overall portfolio. interest rate risk is handled very simply.

So, Loi actually seeks to just match the duration of that of its benchmark which is the Bloomberg one to threeyear government credit index.

Um, so as far as a duration management goes, it's um it's very expected to be anywhere from one and a half to two years over the long term.

So, you know, towards the short end of the curve as far as that goes.

But where a lot of its exposure is uh is found as far as the credit bucket goes is in investment grade, but specifically in that single A to tripleB bucket primarily uh split between corporate credit and securitized debt as well.

So, think uh asset back securities, commercial mortgage back securities uh and collateralized loan obligations.

So, CLOS's.

Um so as far as uh the the selection process goes this is a bottoms up fundamental uh strategy where the team's looking for positive spread opportunities particularly within the securitized markets uh as well as corporate credit as well.

So for example like if I had to look at uh if we looked at like the asset back security exposure of load ice portfolio most of it is expected to be in that triple B bucket as I mentioned earlier but over the life cycle of holding these different types of securitized bonds in the ABS sector um you have the potential to benefit as those bonds near maturity from credit migration.

So maybe they bought it when it was a triple B- rated bond, but maybe when they sold it or the bond matured, this hypothetically speaking, could potentially be single A or or double A as far as uh the overall credit rating goes.

So theoretically, that's how they're looking to add value in the portfolio and capital appreciation potential and current income potential as well because securitized debt tends to offer a pretty attractive yield relative to their corporate credit counterparts.

So uh as far as like the you know overall allocation preference you know there's two different investors investor types for a strategy like load eye one is potentially that cash plus investor naturally there are risks as far as duration and credit risk goes but for those looking to step out uh a little bit further onto the curve and um and take on a little bit more credit risk there could be an attractive yield case there relative to that of a uh of a typical money market or money market like strategy and then the other way is naturally in the core part of a portfolio.

So we like to think of load eye as really this core plus strategy on the short end of the curve.

Uh where there's a really nice diversification potential with this strategy as well.

So for instance the Bloomberg aggregate bond index which is typically viewed as like the S&P of fixed income land that doesn't have CLO exposure.

It barely has ABS exposure and CNBS exposure.

So LOIC could potentially be a nice diversification um value ad there as far as the fixed income allocation goes.