01 Strategy & Academic Basis
The Fixed Income Fund applies a systematic approach to multi-sector credit allocation drawing on Antti Ilmanen's framework in Expected Returns: decomposing bond returns into their constituent premia — duration risk premium, credit spread premium, and liquidity premium. The portfolio actively manages duration and credit quality in response to the yield curve shape and macro regime.
Core positioning spans four credit layers: sovereign investment-grade (safe haven, duration), corporate investment-grade (spread income), high-yield credit (enhanced carry), and emerging market debt (diversification, yield pickup). Duration is managed dynamically — shortening when the yield curve is flat or inverted, extending when the term premium is attractive.
02 Investment Pillars
03 Simulated Total Return
04 Sector Allocation
05 Holdings
| Security | Sector | Duration | Weight |
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06 Macro Positioning & Investment Thesis
The fund is navigating the hardest environment for fixed income in a generation: re-accelerating inflation (US headline CPI 3.8% year-on-year in April), a Treasury that is funding a record debt load increasingly with short-dated paper, and a term premium that is finally being repriced. Positioning is defensive on duration, generous on real yield, and explicit about the difference between a debt level that is large and a debt level that is dangerous.
Sovereign Risk Large debt is not the same as doomed debt
US federal debt now sits above 124% of GDP, with annual interest costs exceeding $1tn — figures that invite alarmist conclusions. The fund's view is more measured. Japan has run a gross debt-to-GDP ratio above 230% for years without a financing crisis, because roughly 90% of that debt is held domestically and funded by an exceptionally high household savings rate. Debt sustainability is a function of who holds it, in what currency, and at what rate — not the headline ratio alone. The United States borrows in the world's reserve currency and retains deep, liquid demand for Treasuries, so the base case is not default but financial repression: inflation and growth gradually eroding the real value of the debt. That is precisely why the fund holds TIPS and keeps duration moderate rather than long.
Funding Risk Financing long-term obligations with short-term money
The more immediate concern is the maturity mismatch. To hold down reported interest expense, the Treasury has leaned heavily on Treasury bills and other short-dated issuance to fund what are fundamentally long-term obligations. This lowers today's coupon but creates rollover risk: as those bills mature, they must be refinanced at whatever rate prevails — and in a re-accelerating inflation environment, that rate may be higher, not lower. A government funding itself short while inflation runs hot is the classic setup for a steeper curve and a rising term premium. The fund expresses caution here through a moderate 5.8-year duration, a barbell that avoids the most rollover-sensitive part of the curve, and a tactical underweight to the long end relative to the benchmark.
Inflation Risk A two-sided inflation impulse
The current inflation picture is unusual because two forces are pushing in opposite directions. On the demand side, a shrinking available workforce and tighter immigration are structurally wage-supportive — a persistent, sticky source of services inflation. On the supply/cost side, tariffs act as a one-off price-level increase that feeds through to goods (tariff-sensitive categories such as apparel and household furnishings rose noticeably in the April print), layered on top of the energy shock from the Strait of Hormuz closure. The combination argues against betting on a rapid return to 2% inflation. The fund therefore carries a structural 10% TIPS allocation and favours real yield over nominal yield, with the next CPI release (10 June 2026) a key checkpoint for the duration stance.
Income Strategy Getting paid to wait
The silver lining of a higher-for-longer regime is that fixed income finally offers compelling carry. A 5.2% portfolio yield means the fund is paid a real return to hold high-quality credit while the macro picture resolves. The strategy is to harvest that income across investment-grade and selectively high-yield credit, keep credit quality up as the cycle matures (spreads are not pricing much recession risk), and use the EM and TIPS sleeves for diversification — rather than reaching for duration or low-quality yield in a market that is not paying enough to take those risks.