Once individual investment parameters are established, our veteran team of fixed income specialists employ a relative return approach. Our objective is to achieve returns in excess of the agreed to benchmark on a consistent basis without taking undo risk. RAM utilizes various fundamental, qualitative, and quantitative measurements in each step of the portfolio construction and management process. We employ state of the art risk management and trading systems within an extensive internal control environment. Ramirez Asset Management believes in a team based approach to investment management and leverages the various skill sets of our individuals.
Fixed Income Committee
The committee is composed of RAM portfolio mangers, analysts/traders and economists.. The committee develops an overall market outlook on a quarterly basis. Macro economic factors such as monetary and fiscal policy, inflation, and employment are reviewed and form the basis for the portfolio manager's decisions for duration and maturity concentrations relative to the benchmark.
On a monthly basis, the committee establishes an outlook for the various sectors within the bond market. Our analysts supply the portfolio managers with various relative value reports for the securitized, credit, and municipal sectors for review. These include historical spread relationships, current risk premiums, breakeven analysis, and supply outlook. Based on sector level guidance from the committee, portfolio managers implement active sub-sector and issuer positions for the portfolios.
The systemic risks of duration, yield curve positioning, and sector exposure are reviewed on a daily basis to ensure they are within policy constraints and consistent with the excess return targets. Strict limits are placed on both term structure and spread risks and are fundamental to our risk management process. Various measures such as effective duration, key rate duration, and contribution to duration are utilized to monitor portfolio exposures relative to the assigned benchmark index. All portfolios are stress tested under varying scenarios using "what if" analysis which identifies a portfolio's sources of return.
Integrated within the daily oversight process is the monitoring of non-systemic risks from sub-sector, industry and issuer exposures. These exposures are measured on a relative basis and controlled within the established risk budgets of RAM. They are reviewed for consistency with client guidelines and the expected alpha of our client's mandate.