Long Duration Credit (plus version available) | Capital Group

LIABILITY-DRIVEN INVESTING

Long Duration Credit (plus version available)

Vehicle: Collective Investment Trusts, Separate Accounts

Overview

Objective: Seeks to provide a portfolio of primarily long duration corporate bonds to reduce client-specific asset/liability volatility.

  • Strategy inception date: 2010
  • Assets in strategy (billions): $7.0
  • Benchmark: Bloomberg Barclays U.S. Long Credit Index

 

  • Duration extension/Curve management:
    • Long duration corporate bonds
    • Long duration U.S. Treasuries and STRIPS 
    • U.S. Treasury futures
    • Interest rate swaps
  • Duration range: +/- two years of benchmark duration

 

Assets in strategy as of June 30, 2018.



Approach
  • Our approach is to build long duration portfolios that seek to provide excess return primarily from industry selection, research-based corporate bond selection as well as duration and yield curve management
  • The fund seeks to maximize total return and yield by holding the majority of assets in corporate bonds. When market conditions warrant a more defensive position, we also will attempt to add value by rotating more aggressively into U.S. Treasuries
  • Our investment process incorporates top-down and bottom-up decisions. We manage duration and sector allocation into corporates at the team level. Portfolio managers make individual decisions on industry allocation, credit quality distribution and issuer selection
  • Research is the cornerstone of our investment process. We construct portfolios by combining broad macroeconomic analysis and specific industry and credit evaluation from both fixed income and equity perspectives
  • Nineteen credit analysts, with insights from their equity counterparts, support portfolio managers by providing their best insights for industry allocation and issuer selection. The combination of equity and fixed income perspectives allows us to evaluate the entire capital structure of companies, enabling us to make what we believe is the optimal selection of issuers and securities
  • In addition, a macro team is dedicated to providing macro insights in areas including U.S. economic research, duration and yield curve expectations, relative value comparisons among industries and on credit quality. This team also provides broad political, quantitative and regulatory insights
  • Our portfolio managers work closely with a team of dedicated corporate traders to identify technical market anomalies, inefficiencies and capital flows — factors that we believe can be exploited for more efficient trade execution
  • Capital’s research process is our best risk control
    • The Capital System℠ naturally creates diversification within the portfolio
    • Our independent global investment control group monitors compliance with portfolio guidelines
    • Our legal and compliance team helps make certain we adhere to regulations in the markets in which we invest
  • This strategy is also available as a “plus” strategy, which incorporates high-yield and emerging markets debt with the goal of achieving higher excess returns

 


History of Fixed Income at Capital Group

We began managing fixed income assets for institutional clients in 1973, and Capital Fixed Income Investors has $321.4 billion in assets under management as of June 30, 2018.

 


Portfolio Management Team


Resources


 

Fund Characteristics 

Defined Benefit Plans (PDF)

 


Additional Reports

Annual Report (PDF)

 


Profile

Long Duration Credit Profile (PDF)

 

 

 


The Capital Group companies manage equity assets through three investment groups. These groups make investment and proxy voting decisions independently. Fixed income investment professionals provide fixed income research and investment management across the Capital organization; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups.

Any collective investment trusts (“CITs”) available under the strategy shown are maintained by Capital Bank and Trust Company (“trustee”), which has retained an affiliate to serve as investment adviser to the trustee for the CITs.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the mutual fund prospectuses/summary prospectuses, which can be obtained from a financial professional, and should be read carefully before investing. Similar information about collective investment trusts can be obtained from Capital Group or participants’ plan provider or employer.


Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.