Our process comprises three major steps:
In our strategy formulation stage we utilise major inputs from external macroeconomic forecasts, activity momentum levels across various industries gained from the analysis conducted by a variety of market participants. Credit research is largely derived from our internal credit analysis resources however we also leverage off the particular skills and research available from our counterparties. We acquire relevant public and proprietary research and forecasts undertaken by external counterparties. This assists us in determining the market outlook and qualifies a short-term outlook for yield momentum. In using this information we combine our findings with rigorous analysis of effective break–even rates of return and model potential scenarios drawing conclusions from the culmination of this analysis.
Portfolio construction is reviewed in light of any changes in our views relative to market expectations. There are four levels of decision making in the portfolio construction stage, namely:
- duration management
- yield curve positioning
- sector selection
- security selection
In addition to daily portfolio monitoring and risk review, portfolio positions are reviewed at meetings in response to:
- Market movements of at least 10 basis points;
- News events, such as economic data releases, credit upgrades or downgrades, Reserve Bank of Australia (RBA) Board Meetings and Federal Open Market Committee (FOMC) Meetings; and
- Changes in our views or relative value assessments.
We have an independent compliance function and, as part of our compliance procedures, reports are automatically generated that summarise investment mandate or other breaches for immediate correction.