Restructuring Management
Restructuring Management is the response to changes in the structural objectives of the portfolio.
In its simplest form, a portfolio restructuring or bond swap is the simultaneous sale of a bond or group of bonds and purchase of a bond or group of bonds that satisfies the portfolio’s investment objective. There are three general categories for adjusting (swapping) a fixed income portfolio:
Increase/realize tax-advantaged aspects of the portfolio
In its simplest form, a portfolio restructuring or bond swap is the simultaneous sale of a bond or group of bonds and purchase of a bond or group of bonds that satisfies the portfolio’s investment objective. There are three general categories for adjusting (swapping) a fixed income portfolio:
Increase/realize tax-advantaged aspects of the portfolio
- Realize a loss that can be applied against realized profits from other investments;
- Swap into/out of tax-exempts from/into taxable bonds for improved after-tax yield; or
- Adjust for state tax exemption.
- Restore target portfolio duration as existing holdings age.
- Extend or shorten maturities and/or call features to reflect a changed interest rate view.
- Increase or reduce interest payment rates (i.e., coupons).
- Adjust the structure of the bonds in the portfolio due to market conditions.
- Take advantage of a technical phenomenon or temporary market conditions (opportunistic).
- Upgrade or downgrade credit quality;
- Increase/decrease geographic diversification; or
- Increase/decrease sector diversification.