Restructuring Management

Restructuring Management is the response to changes in the structural objectives of the portfolio.  

In its simplest form, a portfolio restructuring or bond swap is the simultaneous sale of a bond or group of bonds and purchase of a bond or group of bonds that satisfies the portfolio’s investment objective.  There are three general categories for adjusting (swapping) a fixed income portfolio: 

Increase/realize tax-advantaged aspects of the portfolio

• Realize a loss that can be applied against realized profits from other investments;

• Swap into/out of tax-exempts from/into taxable bonds for improved after-tax yield; or

• Adjust for state tax exemption.

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Change the interest rate risk profile of the portfolio given a change of investment objective or market outlook

• Restore target portfolio duration as existing holdings age.

• Extend or shorten maturities and/or call features to reflect a changed interest rate view.

• Increase or reduce interest payment rates (i.e., coupons).

• Adjust the structure of the bonds in the portfolio due to market conditions.

• Take advantage of a technical phenomenon or temporary market conditions (opportunistic).

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Change the credit risk profile of the portfolio

• Upgrade or downgrade credit quality;

• Increase/decrease geographic diversification; or

• Increase/decrease sector diversification.