Investment Philosophy

BondWave Advisors’ research and philosophy is centered in the belief that the majority of yield and return in high-quality bond portfolios is not as much a product of security selection as it is of portfolio construction. With the right blend of bond characteristics, a high quality portfolio can be structured in accordance with an investor’s objectives. BondWave Advisors can provide advice on how to:

• Structure portfolios with an emphasis on income
• Target maturities to meet significant life events
• Emulate an institutional index

Traditional fixed income money managers are paid a fee to provide investors with an extra amount of return over and above the market’s performance (loosely defined as alpha) based on the manager’s ability to take advantage of opportunities in the marketplace. These managers seek additional portfolio return by utilizing their skill in security selection.

However, historically the returns of fixed income managers with high credit quality strategies have lagged those of market indices, especially recent returns for high quality bond fund and separately managed account managers. Furthermore, when taking into account the management fees paid by the investor, many “high quality” fixed income portfolio managers underperform the market during normal market times. BondWave Advisors believes for high quality bond portfolios the professional money management approach could prove a costly way to invest in fixed income.

BondWave Advisors’ approach to individual bond investment is targeted at clients who seek diversification or reduced volatility in fixed income investing versus seeking above-market returns.

Investors have traditionally turned to indexed portfolios to seek a lower cost investment that can provide more consistent returns versus market returns. Common industry perception holds that it is virtually impossible for smaller, retail portfolios to use individual bonds to mimic an institutional fixed income market index. However, BondWave Advisors’ unique approach makes it possible to emulate an institutional fixed income market index in an individual bond portfolio as small as $200,000, offering a viable option to a large number of investors previously unable to participate in an index based strategy.

BondWave Advisors favors an indexed approach with individual bonds over active fixed income management that is focused on seeking extra return with the selection of specific securities. BondWave Advisors believes the majority of yield and return in a high-quality bond portfolio is not as much a product of security selection as it is on portfolio construction with the right blend of bond characteristics that emulate the chosen portfolio index (or benchmark).

Index based strategies assume that the closer the portfolio structure matches the index, the higher the probability the returns of the portfolio will emulate the index returns. Thus, BondWave Advisors incorporates a methodology that blends the elements of traditional stratification and optimization to fixed income, index-based strategies. Given a high level of credit quality in the portfolio (Aa3 / AA or better), BondWave Advisors’ strategies seek to emulate the targeted index construction in coupon, duration, price, maturity, callability and credit quality - making diversification and the selection of individual bonds less meaningful to the portfolio.