Emphasizing a top-down approach we start with economic analysis, supply and demand pressures in the credit markets, and fiscal and monetary policy. While the primary emphasis is on the U.S. and Canada, the interconnection of global fixed income markets necessitates a thorough understanding of the pressures on interest rates in the other major non-North American economies. We also give consideration to technical factors such as dealer inventories and near-term new issue supply, which can significantly impact the market on a short-term basis, and can affect how we implement changes to our portfolios. 

On an on-going basis, multiple interest rates scenarios are forecasted for the next six to twelve months as well as the yield curves associated with each scenario. In this step, a duration range is set based on our view of the most likely interest rate scenario over the period. The alternate scenarios are used to define and quantify the risk associated with this duration setting and to modify it accordingly. The next step after the duration range has been finalized (with due account for risk), is to build the optimal portfolio, structured with selected bonds, which when combined offer the best risk return profile within this duration range. At this stage, optimization techniques and proprietary modeling software are then used to set the optimal duration. Portfolios are under continual review and traded with respect to always maintaining an acceptable risk/reward relationship. The level of risk chosen depends on two factors: first, the incremental rates of return expected to be earned or foregone for portfolios of higher and lower risk respectively, and second, the client's own risk tolerance level.