“TIPS PLUS GOVERNMENTS”

Since TIPS were introduced in early 1997 their cumulative return has been virtually identical to that of nominal U.S. Treasuries (non-inflation protected bonds).  However, WCB’s proprietary models demonstrate that value can be added to a pure U.S. Government guaranteed portfolio by employing their blended portfolio strategy (TIPS Plus Governments), consisting of both conventional government securities and TIPS, opportunistically over-weighting one versus the other to provide a total return greater than a pure portfolio of either.

WCB's goal, over time, is to construct and actively manage blended portfolios customized to each client’s needs and to provide an incremental return advantage to a U.S. Governments only index or a TIPS only index by employing the following tactics:

(a) The WCB fixed income investment team constantly monitors the valuation of nominal Treasuries versus TIPS of similar maturities to determine which combination of both offers the best strategic value for the client. The allocations to nominal Treasuries and to TIPS in a given portfolio is based on valuation models that employ TIPS yields, nominal yields, and expected forward inflation.  The team also uses fair value models that employ crude oil prices, commodity prices, and currency exchange. In the “TIPS Plus Governments” blended portfolio strategy seldom, if ever, would a portfolio be totally invested only in TIPS or only in U.S. Governments.

(b) The amount of each individual TIPS holding is based on the amount of inflation protection each issue provides relative to the underlying nominal Treasury yield curve. Breakeven levels (that is, the difference between TIPS and nominal yields) can vary along the curve and not always in a logical manner. Also, since the TIPS market is growing and evolving rapidly, WCB factors in a new supply of TIPS securities that are periodically auctioned and could impact relative performance of a maturity sector.

 

In the “TIPS PLUS Governments” management product, each portfolio is customized and managed separately and in accordance with the investment policies and guidelines as determined by the client.