Defined Income Portfolio
Fund Spending Needs Precisely, Predictably and Flexibly
The defined income portfolio is engineered to cost-effectively protect principal and reduce exposure to rising interest rates while precisely matching fixed income securities to spending needs or finding advantageous spots along the yield curve.
The chart above shows how we may have implemented a defined income portfolio in an attempt to match investments to a client’s future spending needs.
Potential Benefits of the Defined Income Portfolio
Cash Flow Matching
We understand that accounts may have unique cash flow needs and may benefit by holding different fixed-maturity securities. Given this, we engineer the portfolio to match the specific cash flows that your client desires with the fixed-maturity securities that you define.
We build each client’s portfolio with fixed-maturity securities so that they have the flexibility to change their portfolio as their financial plan evolves. This is in contrast to annuities and other income-producing products that have surrender charges and fees that may restrict your clients.
Rising Interest Rate Management
We manage rising interest rates by purchasing fixed-maturity securities, and holding them until they mature. This gives us a secure advantage in long-term planning over bond funds that must sell their performing bonds when interest rates rise, and rely on chance to keep yields attractive.
We believe it is essential to protect the principal for anyone who will rely on their fixed-income investments for spending needs. To deliver predictability, we hold investment-grade fixed maturity securities to maturity, so that your clients can effectively lock-in their principal investment while generating yield along the way.
Implementing the Income Portfolio
Watch Professor Huxley and Brent Burns meet with the American College to dig into the research behind the defined income portfolio. Enjoy!