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2019 Asset Manager Awards: Segall Bryant & Hamill, Short Term Taxable Bond Strategy

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James D. Dadura Title: Director of Fixed Income, Principal Years with present firm: 20 years Years in financial services: 24 years Investment focus/Asset class focus: Fixed Income

Asset management firm: Segall Bryant & Hamill Firm’s headquarters: Chicago Year firm was founded: 1994 Number of employees and/or partners: 128 employees/38 partners Assets under management/advisement as of Dec. 31, 2018: $18.6 billion

Segall Bryant & Hamill’s Short Term Taxable Bond strategy won the Asset Manager Award in the fixed income category this year for being more resilient than its peers and focusing on small-issuance fixed income products, which have less than $500 million outstanding.

Envestnet analysts say that “in periods of volatility, ETFs and large asset managers tend to sell off their largest, most liquid holdings to meet redemptions, putting downward pressure on pricing, while SBH’s smaller-sized issues are more resilient from a valuation standpoint.”

In 2018, this certainly was the case, they note. Plus, in the volatile fourth quarter, smaller overlooked issues outperformed larger issues: 0.773 vs. -0.195. The strategy’s “absolute returns for the year landed SBH in the top decile of the [fixed income] universe, while risk-adjusted returns landed it in the top quartile,” according to Envestnet.

Jim Dadura, director of the fixed income group that manages $11 billion, says this team has the same investment philosophy as the rest of the SBH.

“We’re focused on three key things,” he explains. The first is providing consistently strong returns for clients. “We’ve found great opportunities to do this by investing in high quality securities that are overlooked by many other managers,” Dadura says.

Second, “We’re very bottom up focused, and we focus on fundamental research of risk controls over market timing,” the portfolio manager explains.

Third, “No matter what the strategy is, they’re designed to do well in all periods in all markets, but we really emphasize doing well in periods of market stress when the stock market is volatile, when the economy becomes uncertain,” according to Dadura.

This plan helped put the strategy into the top decile of its peer group in 2018, Envestnet analysts say. They note that “the strategy’s volatility (as measured by standard deviation) remained in the bottom quartile (least volatile), while down-market capture finished significantly better than median, reiterating the firm’s commitment to capital preservation.”

The short-term fixed income strategy did well in 2018, Dadura agrees. “Last year caught a lot of investors by surprise,” he says. “For the first time in a long time we saw a cumulative central bank stimulus actually come to a halt, and the market seemed unprepared.”

“The fourth quarter was differentiated [more] than the majority of the year with volatility spiking, spreads in corporate credit widening, and a general flight-to-safety event occurring — this provided an opportunity for SBH to showcase their alpha thesis,” according to Envestnet.

This year, Dadura says, “We expect a little more volatility, so … we’ve increased the credit quality. Our portfolios are doing well, but they’re positioned to do especially well as volatility picks up again.”

In 2019, the team believes a focus on very high quality holdings is important. “In periods of market stress, people go to their bond portfolios,” he adds. “They still need liquidity. Many of our clients, whether pension funds or individuals, still have monthly outlays to make.”

Videos of the award winners can be viewed here:

Profiles of the other individual award winners are found here: