The Index strategy is based on qualitative and quantitative inputs, including economic data and interpretations of government policy. Asset allocation guardrails include 50% – 200% allocation relative to the benchmark for credit, duration, and structure/mortgage weight. A high-conviction exposure to more speculative or diversifying positions is constrained to 0% – 20%.
The characteristics below reflect how we would best position a portfolio of fixed-income ETFs to achieve maximum total return over a comparable baseline neutral portfolio of fixed-income securities (benchmark).
Relative Positioning
Duration
90% Relative Underweight
Yield Curve
Bulleted
Corporate Credit
Underweight
Securitized
Neutral
Conviction
10% Short-Term TIPS
Rationale
90% Duration
The Index holds a 90% relative duration position compared to its benchmark, positioning for a rise in interest rates.
The committee expects the economy and inflation to remain stronger than expected. Recent talk of recession, tariffs, and 10% stock market corrections should have produced lower rates. Yet, the 10-year yield remains above its low of 3.60% last September.
Bulleted Curve Structure
The Index returned to a bulleted curve position relative to the benchmark. This means it is overweight in the middle of the yield curve. This position will benefit from the yield curve steepening.
We expect long-term yields to rise faster than short-term yields and steepen the yield curve.
70% Underweight Credit
The Index is 70% weighted in corporate bonds relative to the benchmark, given strong corporate bond issuance (an increase in supply) and high valuations in the equity market.
Relative corporate bond positions are correlated to stock market movements.
Neutral Securitized
The index held a 120% overweight position in MBS but has decided to shift back to a neutral position in November.
10% Short-Term TIPS
The index held a 5% allocation in EM local debt and a 5% allocation to 0-5 year short-term TIPS in October. In November, the committee decided to exit EM Local Debt and shift to a 10% 0-5 year short-term TIPS position.
The short-term TIPS position will offer inflation protection at an attractive yield.
Allocation Changes
| Name | November 2025 | October 2025 |
|---|---|---|
| iShares MBS ETF | 26.45 | 32.05 |
| iShares 3-7 Year Treasury Bond ETF | 18.75 | 17.00 |
| iShares 7-10 Year Treasury Bond ETF | 13.50 | 12.50 |
| iShares 0-5 Year TIPS Bond ETF | 10.00 | 5.00 |
| Vanguard Short-Term Corporate Bond ETF | 8.35 | 8.30 |
| Schwab Short-Term U.S. Treasury ETF | 7.05 | 6.50 |
| iShares BBB Rated Corporate Bond ETF | 4.50 | 4.50 |
| Schwab Long-Term U.S. Treasury ETF | 4.40 | 2.00 |
| Vanguard Intermediate-Term Corporate Bond ETF | 4.00 | 4.15 |
| Vanguard Long-Term Corporate Bond ETF | 3.00 | 3.00 |