Gurtin Fixed Income Management LLC dba Gurtin Municipal Bond Management, a PIMCO company, is registered with the SEC as an investment adviser and is referred to in the notices that follow as “Gurtin.” All content published or otherwise disseminated by Gurtin on any social media platform, including but not limited to Twitter, LinkedIn, Facebook, Google+, and YouTube (“Gurtin Social Media Platform”), is for informational and educational purposes only and should not be construed as investment, tax, financial, accounting or legal advice, or a recommendation to invest in any particular security, strategy or investment product. Investors should seek such professional advice for their particular circumstances.
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No assurance can be given that the investment objectives will be achieved or that investors will receive a return of any capital nor will any account perform similar to examples or composite performance provided herein. In considering any prior performance information, historical or hypothetical, contained on any Gurtin Social Media Platform, current and prospective investors should bear in mind that prior performance does not guarantee nor is it indicative of future results.
Composite performance includes the reinvestment of all income and generally presented net of fees in U.S. dollars. Therefore, no current or prospective client should assume that the future performance of any specific investment or investment strategy or objective (including those undertaken or recommended by Gurtin) will be profitable or that returns will equal to corresponding indicated performance levels or produce a return of capital.
The analysis contained in any publication published or otherwise disseminated by Gurtin on Gurtin Social Media Platforms is based on the data available at the time of publication which may become outdated or otherwise superseded at any time without notice, and the opinions of Gurtin. Certain information contained on Gurtin Social Media Platforms is based upon third-party sources, which Gurtin believes to be reliable, but is not guaranteed for accuracy or completeness. Neither the SEC nor any other federal or state agency or non-U.S. commission has confirmed the accuracy or determined the adequacy of information published or disseminated by Gurtin on any Gurtin Social Media Platform. Any publication or dissemination of information to the contrary is unlawful. Each reader acknowledges the contents published or otherwise disseminated by Gurtin on Gurtin Social Media Platforms is the sole property of Gurtin and any reproduction or distribution of such information, in whole or in part, other than for its intended purpose with credit provided to Gurtin, is prohibited.
Gurtin claims compliance with the Global Investment Performance Standards (GIPS®). Gurtin has been independently verified for the periods February 1, 2008 through March 31, 2017 by Ashland Partners & Company LLP and from April 1, 2017 through September 30, 2018 by ACA Performance Services. GIPS is a registered trademark of CFA Institute. CFA Institute has not been involved in the preparation or review of this report/advertisement. A copy of the verification report is available upon request.
A prospective client can obtain a compliant presentation and/or the firm’s list of composite descriptions by calling 858-436-2200, or emailing info@gurtin.com.
This confidential report has been prepared solely for clients currently receiving investment advisory services provided by Gurtin Fixed Income Management LLC dba Gurtin Municipal Bond Management (the "Adviser" or "Gurtin"), a PIMCO company. The contents of the report should not be construed as investment, tax, financial, accounting, or legal advice. This is not an official account statement.
Gurtin is a registered investment adviser with the U.S. Securities and Exchange Commission (the “SEC”). This report is produced in accordance to the executed Investment Management Agreement and related Account opening documents (collectively, “Agreements”). If any of the descriptions or terms in this report are inconsistent with the terms of the Agreements, such Agreements shall control.
Neither the SEC nor any other federal or state agency or non-U.S. commission has confirmed the accuracy or determined the adequacy of this document. Any report to the contrary is unlawful.
Each investor should inform himself or herself as to the tax consequences of the investments and services described herein. Clients should have the financial ability and willingness to accept the risks associated with the investments made by the Adviser. The Adviser reserves the right to modify any of the terms described herein.
No assurance can be given that the investment objectives will be achieved or that investors will receive a return of any capital. In considering any prior performance information, historical or hypothetical, contained herein, clients should bear in mind that prior performance does not guarantee nor is it indicative of future results. Therefore, no current or prospective client should assume that the future performance of any specific investment or investment strategy (including those undertaken or recommended by Gurtin) will be profitable or equal to corresponding indicated performance levels. Performance is shown net of fees in U.S. Dollars and assumes reinvestment of all income.
Each recipient of this report acknowledges and agrees that the contents hereof constitute proprietary and confidential information that the Adviser derives independent economic value from not being generally known and are the subject of reasonable efforts to maintain their secrecy. The recipient further agrees that the contents of this report are a trade secret, any reproduction or distribution of this report, in whole or in part, or the disclosure of its contents, without the prior written consent of the Adviser, is prohibited, and the disclosure of this report or its contents is likely to cause substantial and irreparable competitive harm to the Adviser. By accepting this report, each recipient agrees to the foregoing.
As of January 1, 2017, Gurtin Municipal Bond Management extended the final maturity guidelines for the Municipal Limited-Term strategy to no more than 6 years to allow the Municipal Limited-Term strategy to be managed as a five-year limited term ladder that may purchase securities with final maturities up to 6 years. This adjustment was made to provide Gurtin access to a broader bond market allowing for more timely investment and reinvestment of assets.
Index Data: Source Merrill Lynch, Pierce, Fenner & Smith Incorporated (“BofAML”), used with permission. BofAML PERMITS USE OF THE BofAML INDICES AND RELATED DATA ON AN "AS IS" BASIS, MAKES NO WARRANTIES REGARDING SAME, DOES NOT GUARANTEE THE SUITABILITY, QUALITY, ACCURACY, TIMELINESS, AND/OR COMPLETENESS OF THE BofAML INDICES OR ANY DATA INCLUDED IN, RELATED TO, OR DERIVED THEREFROM, ASSUMES NO LIABILITY IN CONNECTION WITH THE USE OF THE FOREGOING, AND DOES NOT SPONSOR, ENDORSE, OR RECOMMEND GURTIN FIXED INCOME MANAGEMENT LLC DBA GURTIN MUNICIPAL BOND MANAGEMENT OR ANY OF ITS PRODUCTS OR SERVICES.
Municipal Stability Tax-Exempt Fixed Income
The Composition Matched Index (CMI) is a dynamic blend of various benchmark indices that replicates the composite’s effective duration and composition over the composite’s lifetime. The CMI’s components, as of February 28th, 2019, are the Barclays 1 Year Municipal Bond Index (1-2) with a weighting of 81.73%, the Barclays 1 – 10 Year Municipal Bond Index Blend (1-12) with a weighting of 15.35%, the Barclays 1 – 3 Month Short Treasury Bond Index with a weighting of 1.98%, Barclays 1 – 3 Year US Treasury Bond Index with a weighting of 0.66% and default Cash Benchmark SWGXX with a weighting of 0.28%. The CMI is rebalanced on a daily basis. The purpose of this index is to demonstrate performance of a benchmark as if the composition of the benchmark dynamically changed overtime to match the composition of the composites. The CMI is designed to match the composite on effective duration and on asset class composition where possible. The CMI is a proprietary benchmark created to illustrate the effect of duration on the composite, but there is no guarantee that it reflects actual duration. For more information on the methodology or values used to calculate the CMI, please contact us at 866.606.2221
Municipal Stability Crossover Tax-Exempt Fixed Income
The Composition Matched Index (CMI) is a dynamic blend of various benchmark indices that replicates the composite’s effective duration and composition over the composite’s lifetime. The CMI’s components, as of February 28th, 2019, are the Barclays 1 Year Municipal Bond Index (1-2) with a weighting of 82.91%, the Barclays 1 – 3 Month Short Treasury Bond Index with a weighting of 1.82%, the Barclays 1 – 10 Year Municipal Bond Index Blend (1-12) with a weighting of 13.57%, Barclays 1 – 3 Year US Treasury Bond Index with a weighting of 1.46% and default Cash Benchmark SWGXX with a weighting of 0.24%. The CMI is rebalanced on a daily basis. The purpose of this index is to demonstrate performance of a benchmark as if the composition of the benchmark dynamically changed overtime to match the composition of the composites. The CMI is designed to match the composite on effective duration and on asset class composition where possible. The CMI is a proprietary benchmark created to illustrate the effect of duration on the composite, but there is no guarantee that it reflects actual duration. For more information on the methodology or values used to calculate the CMI, please contact us at 866.606.2221
Government Enhanced Liquidity
The Composition Matched Index (CMI) is a dynamic blend of various benchmark indices that replicates the composite’s effective duration and composition over the composite’s lifetime. The CMI’s components, as of February 28th, 2019, are the Barclays 1 – 3 Month Short Treasury Bond Index with a weighting of 71.68%, Barclays 1 – 3 Year US Treasury Bond Index with a weighting of 27.73% and default Cash Benchmark SWGXX with a weighting of 0.59%. The CMI is rebalanced on a daily basis. The purpose of this index is to demonstrate performance of a benchmark as if the composition of the benchmark dynamically changed overtime to match the composition of the composites. The CMI is designed to match the composite on effective duration and on asset class composition where possible. The CMI is a proprietary benchmark created to illustrate the effect of duration on the composite, but there is no guarantee that it reflects actual duration. For more information on the methodology or values used to calculate the CMI, please contact us at 866.606.2221
California Municipal Opportunistic Value
The Composition Matched Index (CMI) is a dynamic blend of various benchmark indices that replicates the composite’s effective duration and composition over the composite’s lifetime. The CMI’s components, as of February 28th, 2019, are the BAML 1-3 Year US Municipal Securities Index with a weighting of 18.30%, the BAML 7-12 Year US Large Cap Municipal Securities Index with a weighting of 79.31%, the Barclays 1 – 3 Month Short Treasury Bond Index with a weighting of 0.86% and default Cash Benchmark SWGXX with a weighting of 1.52%. The CMI is rebalanced on a daily basis. The purpose of this index is to demonstrate performance of a benchmark as if the composition of the benchmark dynamically changed overtime to match the composition of the composites. The CMI is designed to match the composite on effective duration and on asset class composition where possible. The CMI is a proprietary benchmark created to illustrate the effect of duration on the composite, but there is no guarantee that it reflects actual duration. For more information on the methodology or values used to calculate the CMI, please contact us at 866.606.2221
National Municipal Opportunistic Value
The Composition Matched Index (CMI) is a dynamic blend of various benchmark indices that replicates the composite’s effective duration and composition over the composite’s lifetime. The CMI’s components, as of February 28th, 2019, are the BAML 7-12 Year US Large Cap Municipal Securities Index with a weighting of 66.01%, BAML 12-22 Year US Large Cap Municipal Securities Index with a weighting of 31.05%, the Barclays 1 – 3 Month Short Treasury Bond Index with a weighting of 0.82%, and default Cash Benchmark SWGXX with a weighting of 2.12%. The CMI is rebalanced on a daily basis. The purpose of this index is to demonstrate performance of a benchmark as if the composition of the benchmark dynamically changed overtime to match the composition of the composites. The CMI is designed to match the composite on effective duration and on asset class composition where possible. The CMI is a proprietary benchmark created to illustrate the effect of duration on the composite, but there is no guarantee that it reflects actual duration. For more information on the methodology or values used to calculate the CMI, please contact us at 866.606.2221
Municipal Social Advancement
An individual security is eligible for inclusion in the Social Advancement strategy, and its sub-classifications, based on several factors including, but not limited to, the security's use of proceeds. Gurtin uses its best efforts to identify securities, where, in its opinion, a substantial portion of the proceeds satisfies the goals of the Social Advancement strategy. The determination by Gurtin of a security meeting the internal requirements for classification as "Social Advancement," or its sub-classifications, is solely based on information provided by an issuer in official statements at the time of the initial security's issuance (including any refundings). No examination or audit is conducted on actual use of proceeds.
Municipal Stability
The Municipal Stability strategy is designed to deliver stable returns in a portfolio with little correlation to riskier asset classes, even during periods of interest rate volatility, by using proprietary market research to identify bonds that are less sensitive to rising interest rates and maintaining a flexible approach to portfolio duration. Municipal Stability Crossover maintains the ability to invest in US Government Treasury and Agency securities.
Municipal Opportunistic Value
National and California: The Municipal Opportunistic Value strategy is designed to generate a high level of income by utilizing proprietary credit and market research to identify high-quality credits and bond structures that we believe are misunderstood by the market, and maintaining higher yield targets and a flexible approach to portfolio duration.
Municipal Ladder
The Municipal Ladder – Ultra Short, Short, Limited, and Intermediate strategies are designed to generate a consistent level of income in line with a limited-term benchmark while maintaining very high credit quality.
Municipal Intermediate Value
The National Municipal Intermediate Value strategy is designed to generate a level of income in excess of a standard intermediate-term ladder by utilizing proprietary credit and market research to identify high-quality credits and bond structures that we believe are misunderstood by the market.
Enhanced Liquidity
The Government Enhanced Liquidity strategy is designed to provide some level of constant liquidity, an enhanced yield over a cash portfolio, and a high degree of principal stability for taxable and tax-exempt investors with an undefined investment horizon of no less than 9 to 12 months.
Government Cash Management
The Government Cash Management strategy is designed to provide daily liquidity and a high degree of principal stability for taxable and tax-exempt investors with an investment horizon of less than 3 to 6 months.
Portfolio Composition: In the Credit Quality section of this report, the ratings used reflect the underlying credit quality of the obligor or the credit support provided by an irrevocable state credit enhancement program. Municipal bond insurance is not considered. We used Gurtin internal ratings in the extremely rare cases when bonds did not have underlying ratings assigned by nationally recognized rating agencies. For bonds that are pre-refunded or escrowed to maturity, we used AAA ratings. While many of these bonds have not gone back to the rating agencies to be re-rated, pre-refunded and escrowed to maturity bonds are universally considered to be of the highest quality (and credit rating) due to the fact that they are backed by U.S. Govt. Securities. For bonds that are secured by U.S. Govt. insured mortgages, we used Moody's current ratings. For bonds with short term ratings, we used the obligors' long term rating.
In the State section of this report, the term Prerefunded refers to a bond secured by an escrow fund of U.S. government obligations that is sufficient to pay off the entire issue of refunded bonds at maturity. The rating of the refunded bond generally assumes the rating of the government obligations (the highest rating) at the time the escrow fund is established. Municipalities find this an effective way of lowering their cost of debt.
Portfolio Analytics: Source: Advent Portfolio Exchange, Gurtin Proprietary Research Systems. All portfolio analytics are weighted by market value (w/accrued income) unless otherwise noted.
Call dates on callable bonds are assumed to be a minimum of 30 days out from the report date.
In an instantaneous simulation, the change in the yield curve happens instantly, the portfolio is perfectly rebalanced at the end of the simulation, and both coupon and principal payments are reinvested at the beginning portfolio yield adjusted according to changes in the yield curve. In an aged simulation, changes in the yield curve occur gradually during the simulation, securities naturally age over time, coupon payments are reinvested at the beginning portfolio yield adjusted according to changes in the yield curve, and principal payments are re-invested into new securities based upon the portfolio’s strategy and changes in the yield curve. Parallel simulations feature ending yield curves derived by applying the specified shift in basis points to the entirety of the underlying spot curve, with the restriction that the spot curve is not allowed to become negative which is achieved by only applying the full shift to those rates which remain positive and then taking an appropriate fraction of the remaining rates. Nonparallel simulations feature ending yield curves which are derived by first calculating the historical average of the respective yield curve over the 20 year period from 1991-2010, and then applying a mean reversion factor to the current underlying spot curve.
Yield to Maturity at Market is the annualized internal rate of return of the portfolio based on the current market price of the security. It is the yield promised to the bondholder on the assumptions that the security will be held to the stated maturity date, all coupon payments will be made and coupon payments will be reinvested at the same internal rate of return.
Yield to Average Life at Market is the annualized internal rate of return of the portfolio based on the current market price of the security. It is the yield promised to the bondholder on the assumptions that the security will be held to the average life date which is based upon the stated maturity date and any amortizing payments, all coupon payments will be made and coupon payments will be reinvested at the same internal rate of return.
Yield to Worst at Market is calculated in a similar manner to yield to maturity at market based on the current market price of the security. For securities with embedded options, the yield to each possible repayment date (including the stated maturity date) is calculated. The yield to worst is the lowest of these calculated yields.
Yield to Maturity at Cost is the annualized internal rate of return of the portfolio based on the acquisition date and price of the security at the time of purchase. It is the yield promised to the bondholder on the assumptions that the security will be held to the stated maturity date or pre-refunding date, all coupon payments will be made and coupon payments will be reinvested at the same internal rate of return. For bonds not purchased by Gurtin, we calculate cost basis using data that our client or their advisor has provided to us or that we have obtained from the data supplied by third-party sources such as custodians. We may also display cost basis data that we have not calculated but that has been supplied by our client or their advisor, a prior custodian or another third party source. Because the accuracy of cost basis data depends upon these third-party inputs, we are not able to guarantee the availability, accuracy or completeness of such cost basis data. Clients should consult their tax advisors for further information.
Yield to Worst at Cost is the annualized internal rate of return of the portfolio based on the acquisition date and price of the security at the time of purchase. At the time of purchase, the yield to each possible repayment date (including the stated maturity date) is calculated. The yield to worst is the lowest of these calculated yields. For bonds not purchased by Gurtin, we calculate cost basis using data that our client or their advisor has provided to us or that we have obtained from the data supplied by third-party sources such as custodians. We may also display cost basis data that we have not calculated but that has been supplied by our client or their advisor, a prior custodian or another third party source. Because the accuracy of cost basis data depends upon these third-party inputs, we are not able to guarantee the availability, accuracy or completeness of such cost basis data. Clients should consult their tax advisors for further information.
In situations where the yield at worst is negative for reasons including, but not limited to, inaccurate or misleading pricing from our third-party pricing source due to unaccounted for pre-refundings or calls, lack of pricing precision for bonds very close to maturity, and pricing based almost entirely on maturity date for bonds with imminent next call dates, we have replaced the negative yield with a zero percent yield in this report.
Modified Duration is a useful measure of the overall sensitivity of the portfolio to fluctuations in interest rates. This risk measure assumes that all securities will be outstanding through their stated maturity date.
Effective Duration is another useful measure of the overall sensitivity of the portfolio to fluctuations in interest rates. This risk measure takes into account the embedded options in securities that add uncertainty to the principal prepayment schedule of a security.
Composite Credit Quality is the asset-weighted average credit rating of all securities in a portfolio, assuming the higher of Moody’s, S&P, or Fitch ratings for individual bonds and taking into account parity ratings of bonds with the same obligor-security combination. For bonds that are nonrated and do not have parity ratings, our internal rating is assumed.
Effective Maturity is the expected time to receipt of principal payments based upon the effective duration of the security. For securities without embedded options, effective maturity coincides with average life, while for securities with embedded options the effective maturity will lie between the number of years until the next option exercise date and the average life.
Stated Maturity is the final principal payment date of the security detailed in the bond indenture.
Volatility/Standard Deviation: The standard deviation of annualized monthly gross returns.
Sharpe Ratio: A risk-adjusted measure calculated by dividing the portfolio’s risk-adjusted monthly return by the standard deviation of monthly gross returns to determine reward per unit of risk. The higher the Sharpe ratio, the better the portfolio’s historical risk-adjusted performance. The risk-adjusted monthly return is the difference between the portfolio’s monthly gross return and the monthly 3-Month Treasury Bill return.
Accrued Income is the amount of coupon income the security holder is entitled to receive if the security is sold in between coupon payment dates.
Taxable Coupon Interest is typically income that is taxable at the federal and state level. However, some securities are exempt from state and local tax such as Federal Home Loan Bank and Federal Farm Credit Bank. It is important to read the bond indenture or consult with a CPA regarding the tax status of a security. Taxable coupon interest includes neither income accrued on discounted zero coupon bonds nor the net expense or net income from premium amortization and discount accretion on coupon-paying bonds.
Tax-Exempt Coupon Interest is typically income that is exempt from federal income taxes. It is important to read the bond indenture or consult with a CPA regarding the tax status of a security. Tax-exempt coupon interest includes neither income accrued on discounted zero coupon bonds nor the net expense or net income from premium amortization and discount accretion on coupon-paying bonds.