Buy and Maintain - A Cost-Effective Alternative Approach to Access Long Duration Credit

In a step towards de-risking their retirement plans, many institutions are increasing their allocations to long duration fixed income. Active strategies are most prevalent but many investors are looking for other ways to access the market for a variety of reasons. As a complement to our strong active credit capability, Insight’s buy and maintain approach could provide you with a compelling alternative to enhance your long duration fixed income strategy.

Insight has been managing active US fixed income strategies for over 20 years and we have strong US long duration fixed income capabilities. However, we understand that different clients have a diverse range of needs, preferences and beliefs – for example, they may believe that the US long duration credit markets face structural challenges and may want to diversify this risk. Therefore, in addition to our range of traditional active fixed income styles, we offer a range of non-traditional custom credit solutions. Our ‘buy and maintain’ approach provides a cost-effective alternative for investors to access the US long duration credit market and can cater to the varied needs of investors who: 

• Desire to diversify the sources of return relative to other managers within their long duration credit strategy 
• Believe that strategies that are managed with close reference to an index may provide undesired exposures to those industries and issuers that are most in debt 
• Believe that once their pension portfolio has reached a sizable allocation to long duration credit, a diversified multi-manager active program will ultimately dilute alpha 
• Want to more closely match their assets to their liabilities and/ or match benefit cash flows 

A buy and maintain approach aims to build a low-turnover portfolio of long-term credit holdings. In our opinion, a buy and maintain credit portfolio offers a credible alternative to active credit strategies as it would be less impacted by changes in liquidity conditions, offers lower costs than more actively traded strategies and avoids many of the inherent long-term inefficiencies of managing strategies with close reference to an index. In addition, it offers liability-aware investors a solution which can not only be better customized to meet their specific duration matching and spread hedging requirements, but can also generate liquidity to meet benefit payments.