WMR credit research on corporate bonds and preferred securities spans an elastic universe and furthers its ability to be more nimble in making recommendations, to elaborate on topical names and respond quickly to situations that present the most (or least) attractive opportunities. Credit sector research includes the following dimensions: - Credit outlook. An integrated macro view of how the current credit and interest-rate cycles could impact individual corporate bonds and preferred securities.
- Rating system. Provides portfolio-directed groupings of corporate bonds and preferred securities, identifying them as core holdings, developing situation attractive and developing situation unattractive. This provides you with insight into WMR's view of an issuer's capital structure, separating the credit risk and security valuation components.
- Reports. Credit sector reports provide commentary on issuers in a defined sector. Both corporate bond and preferred securities valuation reports give background on the security selection process, helping you to make more informed decisions.
| Corporate Bond and Preferred Securities Rating System | | | Core Holdings | We regard these securities as appropriate for fixed-income investors with a low-to-moderate credit risk tolerance and a buy and hold strategy. In our opinion, the issuers of these securities have a lower level of credit risk relative to other similarly rated issuers. We expect the prices and yields of securities issued by these companies to move primarily as a result of overall market trends and changes in underlying U.S. Treasury rates, rather than issuer-specific credit developments. | | Developing Situation Attractive | We regard these securities as appropriate for investors with a moderate-to-high credit risk tolerance due to the possibility of higher security price volatility. Given our view of credit risk and valuation, we believe the bonds and preferreds of these issuers may offer higher total return over the stated holding period relative to the bonds and preferreds of other similarly rated issuers. The prices and yields of these securities are likely to move as a result of issuer-specific credit developments, in addition to overall market trends and changes in underlying U.S. Treasury rates. Investors should review the issuer-specific comments in light of their risk tolerance profile and in the context of their overall portfolio to gauge whether these securities are appropriate investments. | | Developing Situation Unattractive | We believe that at current valuations, investors are not adequately compensated for taking on the credit risks inherent in investing in these securities. In our opinion, downside price risk is greater for these securities, and we believe coupon income may be offset by price depreciation over the holding period. The prices and yields of these securities are likely to move as a result of issuer-specific credit developments, in addition to overall market trends and changes in underlying U.S. Treasury rates. While this is not intended to be a recommendation to sell, in some instances it may be appropriate for investors to reduce or eliminate existing positions in light of their risk tolerance profile and in the context of their overall portfolio. |  | 
