And the last element is a dynamic investment approach. So I have a firm belief that market premiums are not static. They vary over time, and therefore managing assets, the risk premium in portfolio, should vary over time to take advantage of that.In terms of what do our clients think about fixed income, more and more importantly, people are thinking about fixed income in three different ways: what types of objectives do they need to meet with their fixed income portfolios. This is actually quite different than the equity world. The equity world is total return against an index, for any type of client that we have, globally. That’s basically what it is. For fixed income, some people use fixed income differently. We can summarize it into three core buckets: stability, which is just that. You need to make your college tuition payments, you need to make whatever payment it is. You need that money in its stable format. That’s generally money market, something like that. The second bucket is core. Core fixed income is the offset to risky market volatility. So this is the area that needs to go up in price when your stocks or your risky assets are going down in price. And then the third area is just what is stated there, high income. So people not getting enough return on their assets that they have in a bank account, and they need to go out and buy high income. By and large, people run into trouble in fixed income when they confuse these buckets. When they say, well, I’m not getting enough yield on my core bond portfolio, so let me replace that with high income. The problem with that is that high income is actually more highly correlated to the equity market. So all you’re doing is adding more risk to your overall asset allocation. That’s generally not beneficial, because you’re not getting the diversification elements that you want in your core fixed income portfolio.
So that’s an important backdrop to think about, okay, what sort of products do we have, and what are the solutions that our clients are asking us for? So if you look at our product and our clients, on the right hand side, you can see the distribution of the assets that we have under management, which are $227 billion. About two-thirds institutional. We split the other third between our high net worth business, which we label private client, and the retail mutual fund business, both onshore and [unintelligible] bonds here, and offshore as well.On the left hand side, you can see the assets by the way we manage those assets, what sort of index are we looking to be. What sort of assets are we invested in. The three biggest categories here, global, number one, credit, number two, and munis, number three. If you go into the consultant community, they would basically say, look, Alliance is known for, and really good at, global investing and credit investing. I would completely agree with that. I would add one other element, where we’re somewhat underrepresented right now, is munis. So if you look, and you can see that the 14% in munis ties in very closely to the 15% in private clients. So that’s our U.S. high net worth clients, who obviously are using munis for their fixed income allocation. Where we’re light in the muni space is in retail. The mutual fund area. We’ve been in that space for a long time. We’ve just launched a new product or two, and I think that over the course of the next couple of years, you’re going to see us make a significant push into the municipal market for retail. Read the rest of this transcript for free on seekingalpha.com