Crossover

A crossover strategy offers a more aggressive method of fixed income investing for a tax-paying institution. In a crossover strategy, Cavanaugh Capital Management (CCM) alternates between taxable and tax-exempt bonds in client portfolios.

The yield relationship between tax-exempt municipal bonds and taxable bonds is not constant. Thus, the decision to move between taxable and tax-exempt bonds in a portfolio depends upon the relative value between the two markets for securities of similar credit quality, duration and call protection. In managing a crossover portfolio, CCM analyzes historical trading relationships between tax-exempt and taxable bonds, as well as supply and demand in the primary and secondary markets. These inputs help the investment management team determine whether taxable or tax-exempt bonds represent superior value. CCM has expertise in managing both taxable and tax-exempt bond portfolios. This multi-market perspective is mandatory in crossover portfolio management.