Investment Approach
Baird Advisors specializes in risk-controlled fixed income management. We strive to consistently add incremental value over benchmark returns and then compound that added value into competitive long-term results for our investors. Our disciplined, duration-neutral approach is bottom-up in nature and focuses on identifying many small, but more predictable added value market opportunities as opposed to making grand and less predictable top-down market calls.
Investment Philosophy & Process
We believe that the bond market is very efficient in discounting risk and return over time. Bond market benchmarks accurately reflect this relationship between risk and return across the duration curve. Since interest rates are extremely difficult to consistently forecast over time, we employ a duration-neutral, risk-controlled approach. We set the duration of each portfolio equal to that of an appropriate benchmark, thus ensuring a high degree of predictability in tracking benchmark returns. We then add incremental value through security selection, yield curve positioning, sector allocation and competitive execution of trades. Our philosophy is implemented strictly in the U.S. dollar-denominated, cash bond market without the use of derivatives* or leverage.
We employ a bottom-up portfolio construction process focused on risk control. Our risk assessment and monitoring is fundamental in nature and begins at the individual security level, continues through our sector exposure and culminates with the overall portfolio. At all levels, risk control is focused on comparison with the benchmark.
*Except the Baird Strategic Municipal Bond Fund which may invest in U.S. Treasury futures contracts for duration and yield curve management or to manage market and interest rate risk.
Step 1:
Structure portfolio to achieve return of benchmark for each client:
Step 2:
Add incremental value through bottom-up, risk-controlled process: