Defined Income Portfolio

Fund Spending Needs Precisely, Predictably and Flexibly

The Asset Dedication Strategy splits the portfolio into two parts: the “Income Portfolio” and the “Growth Portfolio.” The Income Portfolio is engineered to provide a defined stream of secure cash flows to fund any pattern of spending needs. The cash flows from coupon interest and redemptions of safe, investment grade bonds held to maturity. These bonds are purchased in the just the right quantities redeeming at the right time over a time horizon chosen by each client to integrate with the financial plan. For those not in retirement, the Income Portfolio finds advantageous spots along the yield curve.

 

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Potential Benefits of the Defined Income Portfolio

Cash Flow Matching

We understand that accounts may have unique cash flow needs and may benefit by holding different fixed-maturity securities. Given this, we engineer the portfolio to match the specific cash flows that your client desires with the fixed-maturity securities that you define.

Flexibility

We build each client’s portfolio with fixed-maturity securities so that they have the flexibility to change their portfolio as their financial plan evolves. This is in contrast to annuities and other income-producing products that have surrender charges and fees that may restrict your clients.

Rising Interest Rate Management

We manage rising interest rates by purchasing fixed-maturity securities, and holding them until they mature. This gives us a secure advantage in long-term planning over bond funds that must sell their performing bonds when interest rates rise, and rely on chance to keep yields attractive.

Principal Protection

We believe it is essential to protect the principal for anyone who will rely on their fixed-income investments for spending needs. To deliver predictability, we hold investment-grade fixed maturity securities to maturity, so that your clients can effectively lock-in their principal investment while generating yield along the way.

Implementing the Income Portfolio

Watch Professor Huxley and Brent Burns meet with the American College to dig into the research behind the defined income portfolio. Enjoy!

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