The foundation of Ryan Labs' investment process is our proprietary tools.

INVESTMENT PROCESS

Ryan Labs' investment process is best described as top down sector analysis meets bottom up issue analysis. The quantitative security selection process (TOPS) will rank, by term cell, which bonds are rich and cheap. Although Ryan Labs is term structure neutral to the index benchmark at all times, we will over/underweight sectors and industry groups relative to the benchmark.

We advocate greater use of spread products (agencies, mortgages and corporate bonds) in the shorter areas of the yield curve (ten years and under) where additional coupon is beneficial to support spread movements. We advocate the use of Treasury bonds and benchmark notes as the majority of the composition in the longer area of the yield curve (beyond ten years).

Total return is a function of duration and spread. For example, if a single-A corporate bond has a duration of ten years and a spread widening of 10 basis points, it will lose approximately 100 basis points of total return. Consequently, a tightening of 10 basis points will generate a total return advantage of the same magnitude.

Managing versus an index is oftentimes a zero sum game. By concentrating one's risks in spread products to lower durations, you maintain the overall total return of the index via term structure and limit victories and losses in areas where income can absorb the difference.