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Bond Management
WMP regards bonds as the stable and conservative part of a portfolio, with a clear focus on preserving capital. We therefore avoid high risk in terms of interest rates, credit quality and currencies. The critical measure of a successful investment is after-tax yield.
WMP regards bonds as the stable and conservative part of a portfolio, with a clear focus on preserving capital. We therefore avoid high risk in terms of interest rates, credit quality and currencies. The critical measure of a successful investment is after-tax yield.
These are the basic principles for bond management:
- Broad diversification in terms of borrowers, credit quality and maturities.
- A minimum credit rating of BBB, i.e., investment-grade bonds only. The average credit rating is AA+/Aa1.
- The maximum weighting of any single borrower’s paper can be no more than 10% of a portfolio
(with the exception of AAA-rated government bonds, such as US Treasuries, Swiss government bonds, etc.). - There is an upper limit of 20% per sector for corporate bonds in any portfolio.
- Only liquid bonds are allowed (no smaller issues, no private placements).
We regard credit spreads (interest rate differentials to government bonds) as the key value-creating factor. To reduce currency risk, 70% of a bond portfolio will be invested in principle in the client’s reference currency. We do not use any interest rate derivatives.
The core portfolio is supplemented by specialised external bond managers.