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Discuss the depth of diversification. Do you have formal position limits (sector, country etc.)?

Portfolios are highly diversified. Individual positions are restricted to 10% of an issue and 10% of the fund,
but in practice, individual positions are much lower.
In terms of instruments, the fund has significant holdings in discounted floating rate notes (besides fixed
dated bonds, perpetual, and fixed to floaters). These securities benefit from higher interest rates: the
higher the interest rate, the higher the refix rate. As they are discounted, they are intended not only to
provide a natural hedge for the fixed-rate holdings, but can achieve capital gains in themselves. The fund
managers also take advantage of fixed-to-floater bonds, where the coupon is fixed until the first call date
within five to 10 years and then is refixed on a floating rate note basis. Those securities limit the fund’s
exposure to rising interest rates.
The funds invest predominantly in investment grade issuers, but the fund managers are prepared to go
down a company’s capital structure to find the best combination of yield, value and capital preservation.
One feature of the strategy is the substantial holdings in financials. While many observers associate
financials with universal banks, there are many differences in business models and balance sheets
among the managers’ different holdings. They clearly distinguish between universal banks, investment
banks, asset managers, brokers, life insurance and non-life insurance companies. Their holdings in nonfinancial
companies include a wide variety of global names.

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