Adapting to Today’s Interest Rate Environment

The Enhanced Income strategy was developed to provide clients with an alternative to conventional bond investing.  In today’s low interest rate environment, investors face a combination of challenges.

One challenge is the very low levels of income available with such historically low interest rate levels. The other is the risk associated with being a conventional bond investor in the event interest rates rise as many economic forecasters expect. Rising rates will depress the value of existing bonds proportionate to the length of their maturities in many cases creating a loss in value that exceeds a year or two of income.

This alternative income strategy uses a variety of debt and equity instruments to produce a higher level of income than what is generally available in the bond market at this time.  The degree of risk can be tailored to the preferences of the client and is controlled by altering the types and proportions of the various asset classes selected.  In most circumstances the risks associated with this strategy will be somewhat different than those associated with a conventional bond portfolio.  As a result, this makes the Enhanced Income strategy a favorable companion strategy when paired with a bond portfolio.

Portfolio Characteristics Enhanced Income
Number of Issues Approximately 25-40 Per Portfolio
Issue Maturity Range Varies Based on Forecast
Minimum Account Size $300,000
Current Yield Approximately 5.0%
Recommended Benchmarks Barclays Capital Aggregate Bond
Index / S&P 500 Index (50/50 Blend)