Yield wins over time

• Inefficiencies in fixed income markets present return opportunities
• Fundamental research is central to exploiting these opportunities
• Success derives primarily from our ability to identify and exploit mispriced securities and emphasize undervalued sectors

Research bridges the gap between the possible and the actual. Original research allows us to widen the potential universe of investments for our clients, to understand when the upside potential outweighs the downside risk, to know when divergent analytical opinion spells investment opportunity.

To maximize total return over time, Opus Investment Management seeks to enhance portfolio yield through active sector allocation and individual issue selection.

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Investment Strategy
Based on Macroeconomic Analysis

The Investment Strategy Group consisting of senior investment professionals develops strategies for duration, yield curve positioning and sector allocation for all portfolios. Portfolio duration is usually constrained in a tight range (90% to 110%) around the benchmark duration to contain interest rate risk.

Bottom-up Portfolio Development

1. Security Selection
   Research analysts experienced in specific industries and market sectors analyze the risk/reward attributes of securities and issue opinions based on credit, structure, cash flow and liquidity. Sectors covered include corporate bonds; agencies; Yankee bonds; mortgage-backed securities, including commercial mortgage-backed; asset-backed securities; tax-exempt bonds; private placements; and high-yield securities.
2. Valuation Assessment
   Portfolio management team compares analyst's valuation to current and historical market pricing, as well as to other securities with a similar risk profile. The security is then judged to be under-, over- or fairly valued and a corresponding buy, sell or hold decision is made. Opus defines an exit strategy and target value at time of purchase.
   
   Opus Investment Management's investment process combines macroeconomic analysis with in-depth research on specific securities. The result is value added to client portfolios at four distinct levels: duration, yield curve positioning, sector diversification and security selection.
3. Portfolio Construction
   Portfolios are constructed to meet client investment guidelines. We rotate investments across all sectors of the domestic fixed income markets, as relative valuation, tax effects and opportunity dictate.
4. Portfolio Monitoring and Sell Discipline
   We develop and implement client-specific risk controls, integrating these directly into our trading system, which monitors all portfolios on a pre- and post-trade basis for compliance with client guidelines. Portfolios are updated for all trading activity daily and priced monthly to reflect current market values and ensure compliance with risk parameters.
   
   Portfolio managers and research analysts scrutinize portfolios for relative pricing and credit condition. Once the target return or valuation has been reached, the security is sold. Bonds also may be sold in order to accomplish tax-related goals or to improve an income stream or asset/liability match.

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Benchmarks

We understand the complexities of developing, implementing and managing a portfolio that matches the specific needs of each insurance client.   Because of our experience we are aware that there are times when the standard fixed income benchmarks are not appropriate for performance comparison.   As we have in the past, and as the result of working closely with our clients, we are always prepared to develop a customized benchmark that is more aligned with a client's specific investment guidelines.

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Compliance

We are dedicated to ensuring compliance with client contracts, investment guidelines, SEC & state regulations, and our code of ethics.  

Front End:
A built-in compliance module on the front end of our trading system tests each trade against user-defined compliance rules reflecting the investment policies of that particular client.  

A trade that violates any given rule is rejected and referred to the compliance unit and the portfolio manager for follow-up and resolution.

Back End:
Post-trade compliance is critical to maintaining compliance with client-specific portfolio constraints.   Our compliance system delivers daily reports to the compliance unit and portfolio managers for review and confirmation.

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Fine distinctions, logical conclusions

Working as a team, client and Opus develop portfolio objectives that consider:

• Liquidity and risk-based capital requirements
• Patterns of liability payments
• Cash flow, premium and claim activity
• Domicile and industry regulations

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