Asset One's Tactical Yield strategy is designed to provide competitive investment returns, utilizing fixed income mutual funds.
Objectives of the Tactical Yield Strategy
- Capital Preservation
- High yield
- Competitive total return
- Lower volatility than equity investments
Tactical Yield managers
- Have a combined total of over 90 years of experience
- The lead manager, Porter Landreth, has over 30 years experience
- Top performers in their sector showing recent relative strength with projected continued performance
- Other important factors considered are liquidity, collateral levels, trading limitations, size of fund and adherence to the fund mandate
- Technical indicator signals
- Prevailing market conditions and predicted economic environment
- Input from fund managers
- Ability to enhance return and/or reduce risk
- Technical indicator signals
- Stop losses float up, but not down, using price action from the buy price and the high price, adjusted for market volatility
- Ability to hedge certain portfolio components using market timing to exchange between derivative-based "long" and "short or inverse" bond mutual funds
Over time, the Tactical Yield strategy has outperformed the S&P 500 with about one-third of the risk.
Tools of the Trade
In these interesting times it is important to understand how the bond markets provide tools to cope with different market conditions. Below is a short list of economic events and anticipated responses from the bond toolbox.
In a dollar crisis, the value of the dollar and all your U.S. assets would decline versus other currencies. Hard Currency Mutual funds are basically very short term bond funds that own bonds denominated in other currencies. These are low risk funds, other than risks due to currency fluctuations, and should soar in a dollar crisis.
Rising Interest Rates
Floating Rate funds generally remain stable or rise in value in a rising rate environment as their yields float up with rates. Inverse Treasury funds might also do well.
Raging Bull Stock Market
Convertible bond funds do not peak in value near their issuance value (par) as do most other bonds but float up as the comparable stocks rise.
Bear Stock Market
Treasury Bonds typically rise in value as stocks fall when traders sell stocks and buy Treasuries.
Recovering from Bear Market
High Yield bonds typically get sold down to about 50 cents on the dollar in a serious bear market. They usually have liquidation values of 70 to 85 cents. Buying a diversified fund of these at $0.50 gives a yield of about 12% and provides a large liquidation safety cushion. This can be a profitable and low risk transaction.
This is a tough environment where massive money printing by the world's central banks makes all securities expensive and yields very low. Opportunistic purchases of briefly depressed bond classes with an eye to yield, growth, and safety are the best approach. Fifteen years of this environment in Japan has seen their stock market move from 30,000 to 9,000 in a very jagged fashion.
TIPS, Treasure Inflation-Protected Securities, should rise in value in an inflationary environment. High Yield bonds might do well in this environment too if inflation occurs gradually. Therefore the big bond tool box provides bonds that can thrive in almost every environment. The key is to pick the right tool for the job at hand.
Asset One LLC