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High Risk Returns

High Yield Bond

BenchmarkDurationSectors
Merrill Lynch Cash Pay
High Yield Index
3 – 7 yearsNon-investment grade corporate, sovereign
(government) and mortgage securities

Summary

The High Yield Bond account type is for clients who wish to have a medium term portfolio of taxable securities that have characteristics similar to the Lehman High Yield Index, but with historically higher returns and lower volatility. The goal is to generate above average income and capital gains by holding a portfolio of below-investment-grade high yield securities.The portfolio is concentrated more than the average mutual fund, to minimize the dilution of the best ideas of ALM’s research. Typical portfolios hold 30-40 securities. The portfolio’s average credit quality is maintained higher (“B-” minimum) than the Lehman Brothers High Yield Index. Credit quality is expected to average about a “BB-” rating as measured by a National Statistical Rating Organization such as Moody’s, Fitch or Standard & Poors.

Growth of Income

PortfolioBenchmarkDurationSectors
50-60% stocks/40-50% ALM Intermediate
Investment Grade Bonds
Standard & Poors 5003 – 5 yearsNon-investment grade corporate, sovereign
(government) and mortgage securities

Summary

Typical portfolios hold 20-30 securities. There is a periodic re-balancing of stocks or bonds back to the manager’s preferred asset allocation, thereby increasing the income tha the portfolio generates.The number of bonds is a function of the portfolio, usually not less than 20 bonds per portfolio. The maximum weight of any security is 4% of the total portfolio based on costs. For a further description of the Growth of Income characteristics, please see the Growth section below.

Growth

PortfolioBenchmarkDurationSectors
50-60% stocks/40-50% ALM Intermediate
Investment Grade Bonds
Standard & Poors 5002 – 3 yearsNon-investment grade corporate, sovereign
(government) and mortgage securities

Summary

Typical portfolios hold 20-40 securities. The portfolio is managed by growth at a reasonable rate. Securities are not purchased where the valuations are way out of line relative to the number of things that are growth rate. Securities are selected based on the following: positive cash flow, the fundamentals of a business franchise and the catalysts to make it grow are in place, there is an anticipated growth rate and return on equity or assets, and there is a demonstrated earnings momentum.Cash is maintained at 5% or less unless the portfolio manager is in the process of re-balancing the portfolio. ALM used all tools that they can in their investment process including real estate investments, trust securities and various other structured products such as the NASDAQ 100 Qs