FIXED INCOME PROCESS

Our approach to fixed income investing is to first identify the client’s appropriate asset allocation, and then to consider the client’s income tax rate and investment income needs. Fixed income portfolios are constructed with consideration to liquidity, credit quality, diversification, and appropriate interest rate risk capacity. Each bond portfolio is tailored to the individual clients appropriate tax status, risk tolerance, and duration (maturity) constraints. At Matterhorn, our municipal bond portfolios are diversified across different issuer types including state and local government general obligation bonds and essential services revenue bonds. Additionally, diversification is achieved by purchasing issues in different states and differing entities such as cities, counties, school districts, and universities.

Municipal bonds in our portfolios will typically be rated “AAA” by at least one of the rating agencies, and insured municipals will also typically have at least an “A” rated underlying rating in addition to the “AAA” status enhanced by the insurer. We only buy municipal bonds rated “A” or better to help insure the safety of our client’s principal. Our buy and hold investment strategy is a result of the inefficiencies caused by a wide bid/ask spread. Accounts are not actively traded unless market or issuer changes warrant sales prior to maturity. The duration of our municipal bond portfolios are managed within a 25% range of the duration of the Lehman Brothers 1-10 Year municipal blend index.