Process & Approach

Clark Capital Management Group

About Clark Capital

Founded in 1986, Clark Capital Management Group, Inc. is an independent employee owned investment advisory firm based in Philadelphia, PA. Clark Capital is focused on both long only and innovative risk management strategies, with a goal of successful capital preservation.

Fund Description & Investment Philosophy

The Navigator Duration Neutral Bond Fund offers an approach to municipal bond investing tailored towards today's unpredictable interest rate environment. The primary objective is to maximize total return, which is comprised of income and capital appreciation, while hedging interest rate exposure. The Fund's primary benchmark is the Barclay Municipal Bond Index.

Our investment philosophy holds that it is not possible to systematically predict interest rate direction, but that supply and demand imbalance may cause certain bonds to become cheap or expensive in relation to a model-based estimate of fair value. We will seek to optimize the funds' holdings by actively managing the portfolio with a goal of holding bonds that are believed to have a superior risk-return profile, while attempting to remove interest rate risk via a hedging strategy consisting primarily of selling short in the treasury market.

Investment Process

Any bond purchased for our portfolio goes through a rigorous review and must meet our demanding standards at each level of analysis. The portfolio is constantly scrutinized using the same methodology in order to consistently optimize the value of holdings. The multistep process includes:

  1. Structure review: The quantitative design of the debt, such as coupon, maturity, redemption terms, and other provisions are reviewed.
  2. Credit review: We use a framework that starts at the worst case and works up to the best case for making or holding an investment.
  3. Analysis: Investment metrics are compared with an index-based yield curve that we believe is best suited for the type of bond we are reviewing. After incorporating the value of any embedded option into our model, a spread is calculated that indicates the amount of reward expected relative to the level of risk being taken.
  4. The hedge: In order to mitigate the risk of rising interest rates, the fund will hedge each bond holding using a variety of instruments, most commonly U.S. Treasury Futures.

Potential Investor Benefits

The Fund strives to provide investors with a way to maintain exposure to the advantages of municipal bonds while minimizing risks associated with rising interest rates. We believe there are distinct opportunities from unconstrained value investing in the municipal bond market, but many investors avoid fixed income securities due to todays unpredictable interest rate environment. Traditional municipal bond funds do not manage interest rate risk and therefore expose investors to significant loss of principal as interest rates rise. In an effort to create value for shareholders, the Fund seeks investments in only the most optimal securities, while hedging against risk from rising rates. Unlike traditional bond funds that may be constrained to an index, a region, or a target maturity date, the Fund can invest in municipal bonds that provide the best value, and can liquidate holdings when the value is realized or is no longer apparent.

  • A active hedge against volatile, rising interest rates.
  • Ability to maintain exposure to the advantages of the municipal bond market.
  • Added value via opportunistic, value-oriented investing.
  • Constant portfolio scrutiny in order to consistently optimize the value of holdings.
  • Potential for tax advantaged interest income.