With short-term bond yields near zero, how do you manage to generate returns for shareholders?
Generally, when credit spreads are wide we tilt the portfolio toward a heavier corporate weighting and when they are narrow we tilt it more toward agencies. Right now, credit spreads are probably in the more reasonable range. We’re still buying a lot of corporate bonds right now, and as long as we continue to find deals with companies that we think are high-quality companies, we’ll continue to do so. This is allowing us to capture some yield that is significantly more attractive than Treasuries or Agencies. That said, with all yields as low as they are and the fund being short-term with a duration of less than 3 years, it’s getting more and more difficult to find yield. The biggest risk we see in the short-term besides credit spreads widening is interest rates rising in some kind of a step function, so we’ve made the duration of the fund pretty darn short. Of course our outlook can change over time. I think we certainly won’t see the returns going forward that you would’ve seen over th
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