Introduction to Strategic Income

How Does Strategic Income Differ From Other Multi-Sector Fixed Income Strategies?

Investment Process

Incorporating these philosophical elements, the strategy employs a disciplined approach to sector allocation and relative value through a proprietary risk management framework, implemented by an experienced team with demonstrated security selection experience. Explicit measurement of risk and return combined with a prudent approach to portfolio construction throughout the cycle are key to long-term success.

The investment process can be summarized as follows:

Assessing Relative Value Between Asset Classes

The Fort Washington Strategic Income strategy takes the approach of a value investor, employing disciplined sector allocations and relative value analysis through a proprietary risk management framework. Explicit measurement of risk and return combined with a prudent approach to portfolio construction throughout the cycle are key to long-term success.

The team analyzes individual sectors on a risk-adjusted basis using proprietary tools, including qualitative and quantitative methods. Analysis is performed to determine a sector's potential excess return compared to the downside risk in a stress scenario. This allows for an apples-to-apples comparison of the risk-adjusted value between different asset classes. This forward-looking approach is differentiated in the marketplace because it is based on cause-and-effect relationships, whereas most investors rely on traditional techniques involving historical correlations and volatility.

Managing Interest Rate Duration

Rather than taking large duration positions within the strategy, we use interest rate duration as a valuable risk mitigation tool. Interest rates often fall when risk assets sell-off, as investors flee to less risky assets such as Treasuries. By maintaining exposure to interest rate duration, the strategy has downside protection in volatile environments—a characteristic often desired when investing in fixed income. The strategy has historically been managed with a duration between 4 and 6 years.

The Investment Management Team

The Strategic Income strategy is managed by a highly experienced and stable investment team of 35+ investment professionals averaging 20 years in the industry and 12 years with Fort Washington. The team manages $60.3 billion in fixed income assets, including $6.3 billion in multi-sector fixed income strategies.

There are six senior portfolio managers responsible for the overall management of the strategy, with Daniel J. Carter, CFA, and Austin R. Kummer, CFA, serving as the Lead Portfolio Managers.

Dan Carter joined the Firm in 2000, and Austin Kummer joined the Firm in 2013. Both have led the strategy since its inception. This team sets the overall risk appetite, sector allocation, duration, and macro position of the portfolio (i.e., top-down positioning). This process is a collaborative effort including all members of the portfolio management team with input from all Fort Washington asset managers.

The Fort Washington Strategic Income strategy utilizes sub-sector portfolio managers (Investment Grade Corporate, High Yield, Securitized Products, Emerging Market Debt, etc.) for the composition of the sub-allocations (i.e., bottom-up positioning). These portfolio managers have discretion over their sub-portfolios subject to overall portfolio risk, sector constraints, duration risk, and other targets set by the portfolio management team (e.g., sector or duration may be constrained due to portfolio risk management).

Portfolio Characteristics

As of 09/30/2024⁴

About Fort Washington