Christian Brothers Investment Services (CBIS), a leader in socially responsible investing for Catholic institutions, has launched the CUIT Opportunistic Bond Fund (OBF), a new commingled fixed-income fund. OBF is available exclusively for tax-exempt Catholic institutions and was created to help investors navigate a potentially volatile interest-rate environment.
OBF attempts to mitigate potential interest-rate risk by utilizing more flexible investment strategies and following a shorter-duration benchmark. The Fund, which provides daily liquidity and net asset value, launched with $77 million in assets under management on May 1, 2013. As with all CBIS funds, OBF adheres to CBIS’ socially responsible investing criteria.
“While we cannot predict exactly when interest rates will begin to rise from today’s low absolute levels, a rate increase brought on by inflation appears to be a likely outcome of the ongoing sovereign and private debt burdens,” said Frank D. Haines, CFA, Vice President and Chief Investment Officer of CBIS. “The CUIT Opportunistic Bond Fund is a valuable option because we believe it allows investors to maintain their fixed-income allocation without sacrificing performance if current interest-rate levels remain in effect for an extended period of time, while providing protection if and when rates start to rise.”
The OBF’s sub-advisers, Longfellow Investment Management and Reams Asset Management, will look to achieve the Fund’s objectives by primarily investing in U.S. government, agency, corporate, and mortgage- and asset-backed securities. Below-investment-grade debt securities may compose up to 20 percent of the OBF portfolio, allowing the sub-advisers to augment returns through high-yield investments. OBF’s investment strategy also involves opportunistic but modest use of derivatives, which can reduce trading costs and capitalize on potential changes in investment-grade and high-yield bond credit spreads and the yield curve.
The Fund will utilize the Barclays Capital U.S. 1-5 Year Government Credit Index, which has a relatively short duration (approximately two-and-a-half to three years). The shorter benchmark duration reduces OBF’s negative price sensitivity to rising interest rates, and has a more stable duration than benchmarks that incorporate the mortgage-backed securities sector.
CBIS has a longstanding relationship with OBF’s sub-advisers. Longfellow Investment Management has served as sub-adviser to the CUIT Short Bond Fund since July 2008, and Reams Asset Management has sub-advised the CUIT Intermediate Diversified Bond Fund for the same amount of time.
“The fact that we raised $77 million for OBF since January of this year shows that Catholic institutions are concerned about the effect of potential hikes in interest rates on their portfolios,” said Mr. Haines. “We are confident that the proven strategies utilized by Longfellow and Reams, which emphasize credit analysis and capturing opportunities through tactical trading, will help to shelter fixed-income portfolios from the downside of any future interest-rate hikes without sacrificing returns in the current environment.”
About Christian Brothers Investment Services
Christian Brothers Investment Services, Inc. (CBIS) is a leader in Catholic socially responsible investing (SRI) with approximately $4.7 billion in AUM for Catholic institutions worldwide, including dioceses, religious institutes, educational institutions and health care organizations. CBIS’ combination of premier institutional asset managers, diversified product offerings, and careful risk-control strategies constitutes a unique investment approach for Catholic institutions and their fiduciaries. CBIS strives to integrate faith-based values into the investment process through a disciplined approach to socially responsible investing that includes principled purchasing (stock screens), active ownership strategies (proxy voting, dialogues, and shareholder resolutions), and community investment. www.cbisonline.com