The fixed income market covers a wide spectrum of investment opportunities, ranging from U.S. Treasuries at one extreme to privately-originated fixed income opportunities at the other. Whereas Treasuries, municipal paper, and certain corporate debt instruments help to build the core of some of our clients’ portfolios, we also do occasionally invest in less liquid, higher yielding fixed income securities.
At WHI, we evaluate the specific characteristics of each fixed income opportunity, taking into consideration the paper’s seniority and duration, the strength of the issuers balance sheet and capital reserves, the security and terms of the underlying investment instrument, and the fundamental strength of the issuing organization’s business model, including the quality of the organization’s leadership, anticipated changes to the solvency of the organization over time, and (ultimately) the likelihood that the investment will eventually be repaid in full.
Typically, we have utilized a handful of external fixed income specialists to manage most of our clients’ more traditional fixed income investments, to whom we have dictated very specific investment parameters and limitations. Separately, we have created a series of illiquid, fixed income funds for clients who are willing to trade some liquidity (and assume potentially greater credit risk) in exchange for higher yields within the opportunistic and privately-originated fixed income space.