Strategic Income (Conservative)

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The Shelter Rock Strategic Income Portfolio is our most conservative investment strategy. It is a fixed income managed account that contains a diversified portfolio of individual bonds. Its objective is to achieve positive returns over every 24-month period and superior returns than what can be obtained by money markets, government bonds and CDs over every 24-month period. Certain accounts may also contain several multi-strategy bond mutual funds.

There are a number of important advantages that the Strategic Income Strategy has to offer our clients. These advantages are as follows:

  • FULL TRANSPARENCY: Clients have real-time internet access and full transparency of all bond holdings and their accounts at all times.
  • PREDICTABILITY: The annualized rate of return on individual bonds that are held to maturity can be estimated with a very high degree of accuracy through a calculation known as yield to maturity. If a bond appreciates prior to maturity it can be sold at a profit. If a bond falls below its purchase price the worst case approximate annualized rate of return is largely known if the bond is held to maturity. Bond mutual funds do not have the same level of predictability.
  • SHORT TO INTERMEDIATE BOND MATURITY FOCUS: We primarily invest in individual bonds with short to intermediate term maturities in an effort to minimize business and interest rate risk associated with lengthier maturities.
  • RECESSION RESISTANT INDUSTRIES: We look to invest in a diversified portfolio of well established financially sound companies including businesses that are in recession resistant industries. This may include companies that provide telecommunications and cable services, trash collection, defense, utilities, food and consumer staples. Our strategy is designed to better ensure that our company cash flows remain in-tact to pay back the bonds we are investing in regardless of the economic environment.
  • RIGOROUS DUE DILIGENCE: We perform rigorous due diligence on the companies whose bonds we invest in. This includes analyzing business and industry trends and reviewing financial statements. As part of our due diligence process we interrogate company executives. After a bond is purchased for our clients we closely monitor the company.
  • ACTIVE MANAGEMENT: We actively work with Fidelity's institutional bond traders and we continuously monitor the inventory from over 70 bond dealers. By continuously monitoring the available bond inventory and by reacting quickly we are often able to "lock-in" attractive rates of return on individual bonds purchased for our clients. In the event that we become uncomfortable with a bond after its purchase we will eliminate it from client accounts.

Click here to view a Strategic Income portfolio [pdf]

Two risks to be aware of when investing in individual bonds include default and interest rate risk. Low quality bonds in financially troubled entities have the risk of default which can result in a loss of principle and interest for an individual bond. Shelter Rock’s investment strategy is to invest in what it considers to be very financially strong entities where it believes the risk of default is extremely low. To further reduce risk from any single issue bond, clients are invested in a diversified portfolio of bonds. Additionally, Shelter Rock will eliminate a bond from client accounts if its research concludes that new risks have been introduced thereby reducing the risk/reward trade-off of a particular investment.

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