Most investors are uncomfortable being 100 percent invested in equities or other high risk assets. They want a counterbalance with a reliable source of income and capital.
Traditionally, an investment-grade bond portfolio had served such a purpose, but the long-running fixed income bull market, which produced equity-like returns for more-aggressive fixed income strategies, overshadowed the fundamental case for bonds.
While Breckinridge is opportunistic in credit selection and portfolio structure, we aim to try and maintain a high margin of safety. We seek to generate positive fixed income returns that counterbalance riskier assets in periods of economic distress and uncertainty – as this is when fixed income returns typically matter most to investors. Our goal is to strike the right balance between risk and return, without overreaching for yield.
Stretching too far for yield increases the likelihood that bond portfolios will correlate with equities. The global financial crisis was a trenchant example of a period in which excessive risk-taking proved disadvantageous for many fixed income investors. When the financial crisis roiled markets in 2008 many investment-grade fixed income strategies foundered, as risks that had been considered unlikely or insignificant proved damaging. By contrast, our steadfast adherence to an investment-grade mandate and capital preservation proved beneficial.
Our mission is to provide the highest caliber of investment-grade fixed income portfolio management. With this as our only investment mandate, there has never been any conflict or compromise with other strategies, and we believe that this strengthens our capabilities in research, trading and portfolio management.