Managers & Models

Financial Trust Flexible Income Model

In the current fixed-income environment, we are witnessing an era marked by higher attractive yields, both nominal and inflation-adjusted, and a wealth of opportunities for diversification. Amidst these conditions, the Financial Trust Flexible Income model stands out by leveraging the belief that interest rates will decline as global economic conditions cool from post-pandemic peak activity, positioning the strategy to capture both current income and potential capital appreciation.

The Financial Trust Flexible Income model is a short-duration fixed-income portfolio that invests in exchange-traded funds (ETFs) across most taxable bond market sectors. This approach offers diversification while targeting higher yields and managing volatility.

Investment Philosophy

The core philosophy of Financial Trust Asset Management, and by extension, the Flexible Income model, is to provide clients with a diversified fixed-income portfolio. The primary objective is to ensure current income and preservation of capital, with capital appreciation as a secondary goal. The strategy predominantly invests in ETFs representing various fixed-income segments, including Treasury bills, notes, and bonds, and corporate bonds, high-yield bonds, and foreign bonds.

Investment Strategy

The Flexible Income model utilizes Financial Trust Asset Management’s proprietary tools:

VAR (Volatility Adjusted Return) Ranking compares each ETF’s volatility-adjusted return over four different timeframes, ensuring that investments are stable and profitable.

Yield Momentum (YM) Ranking ranks each ETF by high dividend yield and price momentum, allowing the strategy to focus on high-yielding opportunities with strong performance potential.

In addition to Financial Trust’s proprietary analysis tools, the strategy employs Volume Price Analysis, Elliott Wave Theory, and broad top-down macroeconomic and fundamental analyses. These tools and analyses help manage interest rate risk by adjusting the maturity of holdings and, when necessary, using leveraged inverse ETFs to tactically adjust the portfolio’s duration.

Investment Decision-Making Process

The model’s investment decisions are based on various current economic indicators and outlooks, including business activity, inflation, and monetary policy. Allocations to fixed-income sectors—such as U.S. government securities, corporate bonds, high-yield bonds, and foreign bonds—are periodically adjusted based on the most promising opportunities and prudent risk management.

Benchmark

The Financial Trust Flexible Income model is measured against the Bloomberg Barclays 1-5Yr Government/Credit Index for performance comparison.

Model Construction

The model is actively managed, with rebalancing and reallocations made at the manager’s discretion to adapt to changing market conditions and to capitalize on emerging opportunities.

In summary, the Financial Trust Flexible Income model is designed to navigate the current fixed income landscape with a sophisticated approach to yield optimization and risk management, making it a robust choice for investors seeking diversified income and capital preservation.