The portfolio management team
meets formally twice a week to
review the economy and its impact
on securities markets and client
portfolios. The team regularly
reviews sector and duration
targets for each fixed income
portfolio and discusses any
adjustments that need to be made.

Taxable Bonds

Cavanaugh Capital Management (CCM) actively manages taxable bond portfolios to optimize total returns, while attempting to limit price volatility and reinvestment risk. The firm's taxable bond strategy is designed to not only perform irrespective of changing interest rate environments, but to deliver consistent income while preserving and enhancing principal. CCM uses a wide variety of taxable fixed income securities - Treasuries, agencies, mortgage-backed and asset-backed securities, corporates, taxable municipal bonds, and cash equivalents.

In fact, CCM frequently uses taxable municipal bonds as an alternative to corporate bond investments. For various reasons, taxable municipal bonds typically offer higher yields than corporate bonds of the same credit quality. Furthermore, taxable municipals tend to have more stable credit ratings than corporate bonds. Corporate credit ratings can change suddenly due to unforeseen events whether they may be mergers or corporate scandals. These events are rare among taxable municipal issuers, providing an additional degree of security to these types of bonds.

Extensive research analysis drives the portfolio management team's investing decisions. A thorough analysis of credit quality and industry conditions is undertaken for each position in client portfolios. Each issue is reviewed to determine cash flow and fundamental asset values. As conditions change within an industry, a state or local government, or the economy in general, CCM will re-deploy portfolio assets to enhance performance and avoid unnecessary risk.

Types of taxable portfolios include, but are not limited to, Core Fixed Income (SRI) Composite, Limited Duration Composite, and Enhanced Cash Composite.

Limited Duration Composite

Each portfolio in the Composite must be a discretionary, fee-paying account.  100% of the securities in each portfolio will be invested in U.S. dollar-denominated securities.  A minimum of  90% of the securities in each portfolio will be invested in taxable securities.  The portfolio has the latitude to include up to 20% in securities rated below A.  The client policy must allow the latitude of a duration range + or – 25% of the Index.  If client guidelines either restrict to less than 50% or favor by more than 50% one of these three major categories, Treasuries/Agencies, Mortgage-Backed Securities, and Corporate Bonds/Taxable Municipal Bonds, the portfolio will be excluded from the Composite.  The goal of the account is Total Return.  The benchmark of the portfolio will be the Barclays Capital 1-5 Year Government/Credit Index. Portfolios must have a minimum asset size of $1 million in order to be entered into the Composite. Once included in the Composite, accounts that drop to an asset size below $500,000 will be removed from the Composite.