KBR Total Return Fund Model Portfolio as of July 1st 2011:
The weighted average duration of our portfolio is 6.27 years. The adjusted duration measures the price changes of the portfolio to interest rates changes.
The average rating of the portfolio is currently BBB+ while its average yield-to-worst is hovering around 7.02% or a massive yield pick-up of 484bps over 7-year US Treasury.
The yield-to-worst is trading convention for fixed income securities with embedded options. Yield is calculated to possible redemption dates. Callable bonds will trade to the date of the lowest yield level, the case for our Tier I bonds held in the portfolio.
KBR Total Return Model Portfolio Risk Analysis- Credit spread widening by 50% :
The extreme scenario where credit spreads massively widens or 50% over 1 month translates into a price change of -3.83% or USD 1'040'000 on a portfolio of USD 27’340’000 assuming no change in interest rates.
KBR Total Return Fund Model Portfolio Risk Analysis: VAR Report
Value at Risk (VAR) measures the maximum potential loss on a group of securities over some time period, given a specified probability. In other words, once a probability, or degree of confidence (here 95%) has been set, VAR is the amount which represents the statistical maximum loss for a single security or a portfolio.
In our case the Var provides you with the portfolio 1-day value at risk which stands at 0.70% based on a historical 3 years and the breakdown by sector industry (long enough to be relatively relevant).
KBR Total Return Fund Model Porfolio Risk Analysis: Interest Rate Scenarios:
In conclusion the portfolio thanks to its high carry manages to absorb the interest rate rise relatively well.
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