Vector uses a mixture of publicly available fixed income instruments to meet our clients’ goals. Our Fixed Income clients tend to be conservative investors or institutions that prefer low risk to principal and a total return (interest payments plus appreciation) commensurate with fixed income investing. The current interest rate environment and our beliefs about future inflation play a large role in the duration decisions of our fixed income portfolios. We typically invest in a mixture of U.S. Treasury securities, Treasury Inflation Protected Securities (TIPS), U.S. government agency securities, mortgage-backed securities, investment grade corporate debt, investment grade convertible bonds, and, for tax sensitive clients, investment grade municipal bonds.
Although the investments we make are often limited by various investment policy statements, our general fixed income investment philosophy is that the biggest threat to a bond portfolio, over time, is inflation eroding purchasing power. Our economic model plays a key role in providing the inflation outlook that drives the duration decisions in our fixed income portfolios.