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.

Step 1:
Structure portfolio to achieve return of benchmark for each client:

Step 2:
Add incremental value through bottom-up, risk-controlled process:

Baird Advisors Approach to ESG

As long-term fixed income investors, ESG considerations are an integral part of our investment process. We integrate these sustainable investing considerations into our overall investment process, particularly credit analysis and portfolio construction, for a more holistic assessment of potential risk and impact on valuation and portfolio performance.