Quantifying the risks of investment portfolios in different interest rate environments is virtually impossible because of the vast array of security types and structures unless you utilize the Performance Profile. We have developed the Performance Profile as a comprehensive report that estimates market risk as well as analyzes and summarizes the expected cash flow of your portfolio under various interest rate assumptions. We believe it is the ideal executive summary for portfolio managers to review when considering the risks incumbent in the investment portfolio and when setting strategies for the future.
When will your callables be called?
Historically, portfolio managers only had to focus on mortgage-related instruments when considering cash flow predictability. However, Agency callables have become a significant sector in fixed income port-folios. Because of their all-or-none cash flow characteristics, callables can have a material impact on portfolio performance. Our Performance Profile illustrates the variability inherent in your callable portfolio.
How will rate changes affect your liquidity?
Perhaps your liquidity position appears satisfactory in today’s environment, but a change in interest rates can have a drastic effect on liquidity. As rates rise, calls and prepayments can evaporate rapidly. Conversely, falling rates usually accelerate prepayments and increase the likelihood of bonds being called. The Performance Profile can help you determine if rising rates will leave you illiquid or if falling rates may cause excessive reinvestment risk.
To give you a competitive edge, simply forward your latest investment portfolio. All we require are CUSIP numbers, purchase dates and certificate face amounts. After we have delivered your report, we will follow up to ensure that all concepts and assumptions are thoroughly explained and that recommended strategies can be discussed.
For further information, please contact your account representative.