GW&K Municipal Bond Strategy

Transcription

1 Firm Description GW&K was founded in 1974 to offer innovative investment solutions consistent with our clients's objectives. Our company has grown from a local provider of investment management services to a nationally recognized manager with broad investment capabilities. We first gained attention for our municipal bond expertise, and it remains one of the cornerstones of our investment offerings. Today we serve a diverse client base of individuals and institutions. Investment Philosophy GW&K believes the key to successful bond management is to protect and grow both principal and income. We also believe that an active, national approach provides greater potential to reduce risk and maximize after-tax returns. Integral to our intermediate duration strategy is our pursuit of opportunities across the yield curve and our focus on intense fundamental research to uncover and exploit market inefficiencies. Investment Decision Making Process We developed our Municipal Bond investment program in response to our clients need for higher after-tax returns consistent with preserving and enhancing principal values. Our approach is bottom-up, active and research-intensive. Municipal bond management is a continuous process at GW&K. As interest rates are cyclical and difficult to predict, we believe that our discipline of reacting to rates and our active investment process provides advantages. We construct portfolios using a research-intensive approach, executing purchases and sales after conducting both structure and credit research. Integral to our approach is our flexibility to actively shift positioning to exploit relative value opportunities. Our focus is on the intermediate area of the yield curve that has historically provided the attractive returns of the long end without the associated volatility. As interest rates rise, we capture higher yields and minimize reinvestment risk by increasing our exposure to longer maturity bonds and extending portfolio duration. As rates decline, we aim to reduce volatility by decreasing portfolio duration. We continuously manage portfolio duration and buy and sell bonds accordingly. We balance new opportunities in the market with existing holdings while maintaining a target portfolio duration. Our extensive network of bond dealers helps us monitor our client s holdings regularly and participate in competitive bond offerings on a daily basis. To further augment performance, we have developed internal decision-support tools that help us value securities, conduct performance attribution and analyze portfolios by monitoring individual objectives and constraints. Our presence in the municipal market also provides us access to offerings and new issue opportunities nationwide enabling us to greatly diversify our portfolios and capitalize on the inefficiencies in the market to effectively manage risk. The benefit of dedicated municipal research, market access and extensive tools cannot be replicated by individual investors. We select bonds based on rigorous research and analysis. Our research analysts look beyond the financial statements to uncover opportunities that others may overlook. We carefully evaluate each bond for both credit quality and appreciation potential. After researching the underlying credit, we conduct comprehensive analysis to dissect the structure of the bond to reveal various yield measures, duration, convexity and overall potential return. It is critical to our process to analyze the collective impact of these factors on the relative attractiveness of each bond. We continuously evaluate our holdings versus bonds available in the market. When we find a bond that we believe is more attractive for our portfolios on an after-tax, after-transaction cost basis, we move to swap/sell or buy the bonds through our extensive, national broker network. Manager Biography Nancy G. Angell Nancy began her career at GW&K in 1984 and quickly became an integral member of the firm s Municipal Bond team. She was appointed Co-Director of Fixed Income in 2001, responsible for overseeing all aspects of our management of fixed income assets, including portfolio management, research, and trading. Nancy continues in her role as portfolio manager for all of the firm s municipal bond strategies. Nancy is a member of the firm s Investment Committee and Management Committee. Nancy graduated cum laude from Duke University in 1983 where she received an AB in Economics, and received her MBA with high honors in Finance from Boston University in She is a CFA charterholder, and is a member of the Boston Security Analysts Society, the Boston Municipal Analysts Forum, the National Federation of Municipal Analysts and the CFA Institute. Nancy sits on the Executive Board of Challenge Unlimited at Ironstone Farm.

2 Top Holdings Portfolio Date: 12/31/2017 Maryland St Dept Transn Cons T Bds 5% New Jersey Environmental Infra Ref Bd 5% Univ Tex Univ Revs Rev Fing 5% Oregon St Dept Administrative Rev Bds 5% Metropolitan Transn Auth 5% St Paul Minn Hsg & Redev Auth 5% Oklahoma Transn Auth 5% Massachusetts St Go Consld 5% Lakeland Fla Engy Sys Rev Ref Bds 5% District Columbia Wtr & Swr Au Pub Ut 5% Miami-Dade Cnty Fla Wtr & Swr Ref Bds 5% District Columbia Go And Re 5% Triborough Brdg & Tunl Auth 5% North Tex Twy Auth 5% Washington St For Issues Dtd P Variou 5% Florida St Brd Ed Pub Ed Pub Educa 5% Ohio St Wtr Dev Auth 5% Engy Northwest Wash Elec Rev Ref Bds 5% New York St Urban Dev Corp Rev St Per 5% Georgia St Rd & Twy Auth 5% California St Go Variou 5% New Jersey St Tpk Auth 5% Minnesota Pub Facs Auth 5% Wisconsin St Go Ref Bd 5% Georgia St Go Ref Bd 5% New York N Y Go Bds 5% Los Angeles Calif Uni Sch Dist 5% Weighting % Coupon % Maturity Date Detail Holding Type /1/2027 MUNI BOND - REVENUE /1/2027 MUNI BOND - REVENUE /15/2026 MUNI BOND - REVENUE /1/2030 MUNI BOND - REVENUE /15/2028 MUNI BOND - REVENUE /15/2028 MUNI BOND - REVENUE /1/2026 MUNI BOND - REVENUE /1/2031 MUNI BOND - GENERAL OBLIGATION /1/2026 MUNI BOND - REVENUE /1/2025 MUNI BOND - REVENUE /1/2025 MUNI BOND - REVENUE /1/2032 MUNI BOND - GENERAL OBLIGATION /15/2024 MUNI BOND - REVENUE /1/2028 MUNI BOND - REVENUE /1/2024 MUNI BOND - GENERAL OBLIGATION /1/2026 MUNI BOND - GENERAL OBLIGATION /1/2024 MUNI BOND - REVENUE /1/2025 MUNI BOND - REVENUE /15/2024 MUNI BOND - REVENUE /1/2024 MUNI BOND - REVENUE /1/2023 MUNI BOND - GENERAL OBLIGATION /1/2031 MUNI BOND - REVENUE /1/2023 MUNI BOND - REVENUE /1/2025 MUNI BOND - GENERAL OBLIGATION /1/2023 MUNI BOND - GENERAL OBLIGATION /1/2022 MUNI BOND - GENERAL OBLIGATION /1/2024 MUNI BOND - GENERAL OBLIGATION

3 Historical Sector Allocation Time Period: 3/1/2014 to 12/31/ / /2014 6/ /2015 6/ /2016 6/ /2017 Option/Warrant % Forward/Future % Swap % Cash & Equivalents % Asset-Backed % Covered Bond % Commercial Mortgage-Backed % Non-Agency Residential Mortgage-Backed % Agency Mortgage-Backed % Preferred Stock % Corporate Bond % Convertible % Bank Loan % Municipal Tax-Exempt % Municipal Taxable % Government Related % Government %

4 Historical Credit Quality Allocation Time Period: 3/1/2014 to 12/31/ / /2014 6/ /2015 6/ /2016 6/ /2017 Not Rated % Below B % B % BB % BBB % A % AA % AAA %

5 Historical Maturity Allocation Time Period: 3/1/2014 to 12/31/ / /2014 6/ /2015 6/ /2016 6/ / Yr % Yr % Yr % Yr % 7-10 Yr % 5-7 Yr % 3-5 Yr % 1-3 Yr %

6 Historical Coupon Allocation Time Period: 9/1/2011 to 12/31/ / /2012 6/ /2013 6/ /2014 6/ /2015 6/ /2016 6/ / % % % % 9-10 % 8-9 % 7-8 % 6-7 % 5-6 % 4-5 % 3-4 % 2-3 % 1-2 % 0-1 % 0 %

7 Performance Relative to Peer Group Peer Group (5-95%): Separate Accounts/CITs - U.S. - Muni National Interm YTD 1 Year 3 Years 5 Years 10 Years As of Date: 12/31/2017 YTD 1 year 3 years 5 years 7 Years 10 years

8 Performance Relative to Peer Group Peer Group (5-95%): Separate Accounts/CITs - U.S. - Muni National Interm

9 Rolling 3-Year s Peer Group (5-95%): Separate Accounts/CITs - U.S. - Muni National Interm Rolling 5-Year s Rolling 7-Year s

10 Risk-Reward - 1 Year Time Period: 1/1/2017 to 12/31/ Risk-Reward - 3 Year Time Period: 1/1/2015 to 12/31/ Std Dev Std Dev Risk-Reward - 5 Year Risk-Reward - 10 Year Time Period: 1/1/2013 to 12/31/2017 Time Period: 1/1/2008 to 12/31/ Std Dev Std Dev

11 Up/Down Capture - 1 Year Time Period: 1/1/2017 to 12/31/ Up/Down Capture - 3 Year Time Period: 1/1/2015 to 12/31/ Up Capture Ratio Up Capture Ratio Down Capture Ratio Down Capture Ratio Up/Down Capture - 5 Year Up/Down Capture - 10 Year Time Period: 1/1/2013 to 12/31/2017 Time Period: 1/1/2008 to 12/31/ Up Capture Ratio Up Capture Ratio Down Capture Ratio Down Capture Ratio

12 The composite performance displayed herein represents the investment performance record of GW&K. GW&K claims compliance with the Global Investment Performance Standards (GIPS ) and has prepared and presented this report in compliance with the GIPS Standards. GW&K has been independently verified for the periods January 1, 1995 through December 31, Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS Standards on a firm-wide basis, and (2) the firm s policies and procedures are designed to calculate and present performance in compliance with the GIPS Standards. The Municipal Bond Composite has been examined for the periods January 1, 1995 through December 31, The verification and examination reports are available upon request. GW&K Investment Management, LLC, is defined as an SEC-registered investment adviser and was founded in GW&K is an affiliate of Affiliated Managers Group, Inc. (AMG), a Boston-based asset management holdings company, and is an independent operating company under the AMG umbrella of managers. The Municipal Bond Strategy seeks to maximize after-tax returns while preserving and enhancing capital. Accounts in the composite are actively managed portfolios with bonds diversified across multiple sectors within the municipal bond market. Portfolios are diversified by geography, bond characteristics and the nature of the issuer s business. The Municipal Bond Composite (composite) includes all portfolios invested in the Municipal Bond Strategy with a minimum market value of $250,000. The composite was created on September 30, The municipal bond segments of multi-asset portfolios are included in the composite. Each segment of multi-asset portfolios is managed with its own cash account. Accounts are included in the composite after four full months under management. Closed accounts are included through the last full month under management. Inception date is January 1, All results reflect the reinvestment of dividends and income, and factor in commission costs. Performance is expressed in U.S. dollars. Composite portfolio income may be net or gross of withholding tax depending on the accounting methodology of the custodian bank. The performance results presented may not equate with the rate of return experienced by any particular GW&K portfolio due to differences in brokerage commissions, fees, position size in relation to account size, diversification among securities and market conditions. Prior to January 1, 2000, cash inflows on multi-asset portfolios may have temporarily resulted in an additional cash position that was not allocated to each portfolio segment during the period of time in which it was being invested. Investment performance for these segments has been modified to reflect the effect of cash using the single asset portfolios as a proxy. A complete list and description of the firm s composites as well as policies for valuing portfolios, calculating performance, and preparing compliant presentations is available upon request by contacting GW&K Marketing at Effective March 30, 2015, the legal name of the firm was changed from Gannett Welsh & Kotler, LLC to GW&K Investment Management, LLC.