WCG Call - 4/9/21

Question 1

5.1 - What are you doing?

Answer 1

Actually asking, what were you doing?

Question 2

5.2 - What did we do?

Answer 2

a) had less duration, used the curve and had less exposure to long rates, used TIPS, the energy sector, plus sectors, and used our global research platform to make better individual security selections too
b) in a nutshell, we did what we always do. used 6 month outlook pulled a lot of levers using an unbiased approach that can work in all sorts of different environments, including this one

Question 3

5. 3 - Why not just be short a bunch of duration and call it a day?
   a) max “outs”
   b) contrast to biased or large single bets
   c) compare to our approach

Answer 3

a) the unbiased multiple lever approach delivers a better and more consistent return and income stream through the cycle. for the card players out there, think of this as maximizing your “outs.”
b) contrast that with a short duration by itself. it has only 1 way to win. only 1 “out.” a really large short duration position can really go wrong too, and we’ll show an example of this later.
c) compare that to our approach. many ways to win besides just rates moving higher, and even more ways where we can be wrong about some things and it still not hurt our clients
d) our approach results in a much more robust portfolio that you and your clients can have more confidence in, in more types of environments

Question 4

5.4 - But that’s the past. what are we doing NOW and WHY?

Answer 4

4 words: “Getting closer to home”

Question 5

6.1 - Why?

Answer 5

a) Deeper into uncharted territory. not about morality or politics or anything else. just a simple reality that the only only somewhat comparable scenario happened 80 years in the midst of a World War. and we’re not in a World War.
b) so no one knows, and we should exercise some humility given that reality.

Question 6

6.2 - Counter argument

Answer 6

Ok, uncertainty is going up, but at least you’re getting paid for it.

Question 7

7.1 - But are you?

Answer 7

a) Unfortunately not. in fact, the opposite is true in area after area and sector after sector.
b) we show IG and HY in this chart because that’s where we’ve had more exposure, but it’s true across the board (Securitized, EM, EUR Credit)

Question 8

8.1 - Sand chart

Answer 8

This is why the sand chart looks like it does

Question 9

9.1 - Table

Answer 9

a) shows both the core and plus sector exposures and changes.
b) general theme is “getting closer to home”

Question 10

9.2 - Recap

Answer 10

a) uncertainty is increasing
b) valuations are deteriorating
c) as a result, positioning is “getting closer to home”, which puts us in a great position to act whenever and where ever opportunities arise in the future