To construct a portfolio tailored to the client's needs, we start by listening to the client to understand their goals and parameters.

First, we discuss returns available in fixed income markets and relate them to the client's return objectives. We present to the client a clear picture of the risk/return trade-offs inherent in any of the approaches that could be taken to achieve their objectives. Here, risk can be defined as tracking error, draw-down or absolute volatility. Using the client's risk tolerance as our guide, we begin to build an investableReturn ImplementationVolatility's universe for the client.

Looking at the sources of return we can capture, an efficient portfolio begins to take form:

 

Source of Return	Implementation
Volatility	MBS Callable agencies CMBS  ABS Options / Swaptions
Credit	Investment grade bonds CMBS  ABS High yield bonds Emerging market debt
Inflation	TIPS Swaps Currencies Commodities
Term Structure	Futures
International	Developed market debt Emerging market debt