HighMark^® Capital Management

Core fixed income

Our core fixed income strategy seeks to capture market inefficiencies predominantly through sector allocation and security selection decisions in the context of robust risk management controls. We seek to minimize volatility through strict limits on relative sector exposures and duration decisions and manage idiosyncratic risk through individual issuer limits. Through our consistently applied philosophy and process, we seek to generate above market returns over market cycles with volatility of performance at or below our primary index.

Short-term fixed income

Our short-term fixed income strategy seeks to benefit from opportunities arising from changes in interest rates, volatility, credit and sector spreads, and the shape of the yield curve in constructing a portfolio that seeks to outperform the Barclays U.S. 1-3 Year Government/Credit Index over time.

Our process is based on the belief that fixed income markets are inefficient and active management which emphasizes sector and security selection can generate superior long-term results.

Tax-free fixed income

HighMark's intermediate tax-free fixed income strategy seeks to deliver a high-quality, well-diversified portfolio that provides a high level of current income that is exempt from federal and California state income taxes. The process is based on our conviction that an intermediate-term portfolio captures a substantial amount of the available yield in the tax-exempt market while providing a lower exposure to interest rate and price volatility than longer-term portfolios. The strategy is available in both national and state-specific tax-exempt implementations. Portfolio duration is controlled via HighMark’s analysis of macroeconomic projections, relative sector value versus Treasury yields, and federal and state-specific political considerations that may impact fiscal policy.

Investment philosophy

Income advantage – Seek to maintain a durable income advantage as compounding interest is an essential component of value-added fixed income investment returns.

Fundamental research and mean reversion – Independent, in-depth fundamental research helps us capture an income advantage and have confidence in our investment decisions during periods of volatility. Mean reversion is a critical component in developing investment ideas and maintaining a sell discipline.

Asymmetric risk avoidance – Given that fixed income instruments may provide limited upside and maximum downside return potential, careful attention to issue- and issuer-level analysis is critical to portfolio construction.

Risk management emphasis – Control risk by using a consistent, disciplined investment process as well as maintaining strict limits on individual issuer exposure, sector allocation and duration positioning.

HighMark's liquidity-management strategies seek to provide safety and yield while attempting to maximize income, preserve principal and maintain liquidity. The strategy is available in both cash management and limited maturity implementations.

Investment philosophy

Fundamental economic analysis – Liquidity-management portfolios are positioned based on expected changes in global economic fundamentals. Global economic indicators provide insights into the pattern of business cycles and potential changes in the Federal Reserve policy. Liquidity-management portfolios are structured to capitalize on expected changes in policy while maintaining credit risk characteristics consistent with each client’s investment guidelines.

Market and credit analysis – In-depth yield curve and sector analysis, as well as historical spread volatility and excess return trends, are analyzed to help identify attractive securities among multiple asset classes and market sectors to enhance portfolio diversification and yield.

Customized portfolio construction – Portfolios are tailored to each client’s stated objectives and liquidity needs by diversifying across multiple industries and security types.

Prudent risk management – The strategies seek to ensure that risk is consistent with client investment guidelines and is managed and minimized through portfolio diversification, monitoring of holdings and interest rate sensitivity analysis.

Customized investment management

At HighMark, our clients benefit from direct access to a skilled and experienced portfolio manager who designs a customized investment strategy for each client's unique circumstances and risk tolerance. Our portfolio managers are market experts that distill industry knowledge and company research into a disciplined investment process. We believe that by aligning the firm’s institutional perspective with our clients' unique circumstances, we provide a better opportunity to meet our client’s needs and objectives. We are committed to delivering competitive investment strategies to all client portfolios. Our globally diversified approach to portfolio construction extends across all asset classes and alternative investment strategies, drawing on our own expertise and that of other leading managers.

Investment philosophy and core beliefs

It is a foundational principle of HighMark that there is no “one size fits all" investment strategy. Rather, we believe meaningful value can be added through a customized approach that is designed to align investment goals and objectives with risk tolerance. We believe that the key to adding value to client portfolios within an acceptable risk tolerance lies in HighMark’s rigorous asset allocation and portfolio construction process. Our multidimensional approach to building a customized and robust investment strategy is grounded in the principles of modern portfolio theory and implemented with the highest degree of thoughtfulness and independence.

Our core beliefs serve as the foundation of all investment decision-making:

• All investment decisions begin with understanding various dimensions of risk.
• Compensation for risk taken should be optimized to the greatest degree possible.
• A team-oriented portfolio management structure leverages robust internal capabilities across multiple disciplines.
• Customized asset allocation can be used to manage risk (strategic) as well as to enhance return (tactical) within client guidelines.
• Rigorous investment manager due diligence is essential for portfolio implementation.
• Ongoing portfolio monitoring and client dialogue ensures the portfolio remains aligned with objectives and risk tolerance.

HighMark is able to provide a unique level of service that combines our fully-vetted, open architecture investment manager universe with our internal competencies in fixed income and equity management. We identify, evaluate and monitor outside manager strategies and combine them with our proprietary internal strategies in order to maximize risk adjusted returns and minimize fees.