Separately Managed Accounts

Fixed Income

Investment Philosophy
The Commerce Trust fixed income investment philosophy focuses on comprehensively managing all key factors that contribute to fixed income performance in order to achieve a stable pattern of returns while minimizing risk. Within this framework, we believe investing in undervalued and improving credit situations will result in consistent investment returns that outperform the benchmark while incurring a lower level of risk. 

Our investment process is based on four major tenets:

1. Duration. Set and manage duration targets close to that of the benchmark. (Modest duration tilts are determined monthly by Investment Policy Committee.)
2. Sector. Apply fundamental research to determine sector emphasis.
3. Yield curve. Identify areas of the yield curve exhibiting greater-than-expected yield for a given maturity focus.
4. Securities. Seek credit-driven securities that improve the portfolio’s yield.

Our decision-making process begins with a complete understanding of, and agreement upon, investment policy guidelines. We set duration targets, establish sector exposures, determine yield curve positioning, manage issue selection and optimization, and monitor ongoing risk. 

Once an appropriate benchmark is determined, portfolio optimization is generated given the above objectives and constraints. This provides the foundation, or blueprint, for the portfolio. 

Customized Investment Approach
No two clients are alike – and neither are their portfolios. We build a separately managed, fully customizable portfolio for every client. We practice a consultative approach using fundamental credit research and proprietary fixed income models to discover securities we believe the market has mispriced. Investment portfolios are constructed from the broad U.S. investment grade bond universe, including: treasury, agency, corporate, mortgage-backed, asset-backed, and municipal bonds.

Fixed Income Strategies:

• Core
• Core Plus
• Municipal
• Short-Term
• Intermediate
• Structured Portfolios

Our team of experienced portfolio managers, working with dedicated fixed income analysts, manages over $37 billion in mutual funds, bank strategies, and advisory accounts for hundreds of institutional and private clients.¹

Our tailored solutions for well diversified portfolios are intended to result in stronger risk-adjusted returns relative to benchmarks in a fully customized format. We utilize various techniques to reduce the volatility and tracking error of the strategies relative to the applicable benchmarks, and our long-term, forward-looking approach intends to balance risk management with enhanced return.

Equities

Investment Philosophy
Commerce Trust equity portfolios provide institutional investors with opportunities for growth and income by combining a low volatility approach with quantitative strategies that are objective and repeatable. Our team of experienced portfolio managers, working with dedicated equity analysts, creates customized equity portfolios that complement and align with commonly utilized equity strategies while managing for risk.

Approach
Enhanced Return
We practice a consultative approach using proprietary equity strategies to discover potential opportunities for enhanced return or consistent income.

Risk Management
Various techniques are utilized in an effort to reduce the volatility and tracking error of the strategies relative to the applicable benchmarks.

Long-Term Perspective
We take a long-term, multi-generational approach intended to balance risk management with enhanced return.

Equity Strategies
Fundamental S&P 500 Strategy
The investment objective of the Commerce Fundamental S&P 500 Strategy is to outperform the S&P 500 Index by 1% to 3% per year. Stocks for the 1,000 largest domestic companies are screened based on various measures, such as analyst coverage and liquidity. Next, analysts perform both top-down and/or bottom-up analysis to identify stocks and industries expected to perform well given the current economic outlook. Our process seeks to add value through fundamental analysis of each stock to arrive at a well-diversified portfolio that emphasizes stocks poised to outperform regardless of the market environment. Risk and tracking error are minimized with constraints on sector and individual stock weightings.

Large-Cap Growth Strategy
The Commerce Large-Cap Growth Strategy creates a well-diversified portfolio of large-cap stocks seeking to outperform the Russell 1000 Growth Index over a full market cycle (often thought of as a peak-to-peak period in the market with at least a 15% decline in the middle) by protecting capital during periods of market declines and participating in capital growth during rising market periods. This strategy also includes a weighted allocation to the largest stocks in the index in an effort to reduce tracking error. We emphasize low price volatility while preserving capital and managing downside risk. Implementing a low-volatility strategy of investing in stocks with lower price volatility and avoiding stocks with high price volatility is expected to result in a portfolio with less total return volatility.

Mid-Cap Growth Strategy
The Commerce Mid-Cap Growth Strategy similarly creates a well-diversified portfolio of mid-cap stocks seeking to outperform the Russell Mid Cap Growth Index over a full market cycle by protecting capital during periods of market declines and participating in capital growth during rising market periods. We emphasize low price volatility while preserving capital and managing downside risk. Implementing a low-volatility strategy of investing in stocks with lower price volatility and avoiding stocks with high price volatility is expected to result in a portfolio with less total return volatility.

Large-Cap Value Strategy
ur large-cap value strategy invests in stocks with attractive dividend yields and high-quality characteristics. We seek to outperform the Russell 1000 Value Index over a full market cycle by collecting dividends, participating in capital growth, and protecting capital during periods of market declines. This approach also can result in a portfolio with lower return volatility while producing a level of income and serve as a complement to a passive value investing strategy.