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Fixed income portfolio risk management
| Credit risk |
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| Credit risk is managed by ensuring each corporate security is extensively researched and modeled to ensure it is of good quality and presents minimal risk of downgrades and defaults. Proprietary models are built for each security. |
| - Daily monitoring |
- Proprietary models on each and every holding |
| - Models updated quarerly |
- Management meetings with each security held in portfolio |
| Interest rate risk |
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| Interest rate risk is reduced by managing the duration of the portfolio to be very close to that of the underlying index (+/-0.1 years). This ensures the portfolio will respond to interest rate changes in the same fashion that the index does. |
| - Duration matched to underlying benchmark |
- +/- 0.1 years |
| - Rebalanced daily |
- Duration matched across the yield curve |
| Yield curve |
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| Yield risk is managed by monitoring the terms of the securities underlying. |
| - Daily matching to index terms |
- Will take advantage of pricing anomalies along the curve |
| - Divergences from the index are monitored and eliminated when no longer beneficial |
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