Q:  Do you try to invest in one specific sector?

A: No, domestically we strive to let our economic outlook dictate our sector weightings. Internationally, our macro view and the particular aspects of the various countries will drive our positioning.

Q:  What kind of risks do you monitor and how do you go about mitigating them?

A: We are always monitoring the tracking error of the portfolio. We are going to be using a value-at-risk method. We want make sure we know where our tracking error is and where we think it should be. There are times we want to take risks, and times when don’t have a large conviction. That is when we say ‘I am going to move my tracking error down because I am not as confident of where interest rates or the U.S. dollar is going to be.’ So you take off some of your position and reduce your risk.

The fixed income market is a little different than the equity market. Our positioning depends on what our risk tolerance is at that time. We run every trade through a co-variance matrix to make sure that the impact of the trade on the portfolio’s overall tracking error matches up to what we expected it to be.