FPA New Income Fund

Investor Summary

Abhijeet Patwardhan serves as Partner, Portfolio Manager, and Co-Director of Research for the FPA New Income Fund, bringing over 15 years of experience at FPA since joining in 2010. He assumed sole management responsibilities in July 2022 when Thomas Atteberry retired from co-managing the fund, leading the strategy through a period of significant market opportunity following what was described as 'the worst bond market in a century.' Prior to joining FPA, Patwardhan gained valuable institutional investment experience as an investment analyst at Reservoir Capital Group and D.B. Zwirn & Co., as well as investment banking experience at UBS Warburg and Donaldson, Lufkin & Jenrette. His educational credentials include a Bachelor's degree in Economics earned summa cum laude and an MBA from the prestigious Wharton School of the University of Pennsylvania. Under his management, the fund has maintained its exceptional track record of capital preservation while positioning to capture attractive opportunities in the fixed income markets. His leadership coincided with the strategic decision to reopen the fund to new investors in July 2022 after it had been closed since 2020, demonstrating his ability to identify and capitalize on market dislocations. Patwardhan's approach combines rigorous fundamental analysis with disciplined risk management, maintaining the fund's philosophy of winning by not losing while adapting to changing market conditions. His tenure has been marked by consistent application of the fund's absolute value approach and commitment to the long-term investment horizon that has characterized FPA's investment philosophy since the firm's founding in 1954.

Fund Strategy

The FPA New Income Fund operates under the core philosophy of 'WINNING BY NOT LOSING,' emphasizing capital preservation while seeking long-term total return through both income generation and capital appreciation. The fund employs a fundamental, bottom-up, absolute value approach across both investment-grade and non-investment grade U.S. debt securities without sector constraints. The strategy emphasizes rigorous risk management using a 100 basis point duration stress test to identify bonds offering breakeven or positive returns even if interest rates rise significantly. Portfolio construction maintains flexibility with minimum 75% investment in high-quality assets rated A- or higher, allowing up to 25% in credit assets rated BBB+ or lower based on market conditions. The fund typically holds investments to maturity unless valuations increase to levels well above par, generally purchasing cash bonds without relying on derivatives to build or manage exposures. The approach takes a contrarian stance, favoring higher quality and longer duration to capture attractive real yields when most active bond funds are taking more credit risk and less interest rate risk. The fund aims for positive absolute returns over 12-month periods and seeks to outperform inflation plus 100 basis points over five-year periods. Since inception in 1984, the fund has produced positive returns in 97% of rolling 12-month periods and has never lost money in any calendar year. The investment philosophy emphasizes that it is never possible to know with certainty the future path of interest rates, leading to a disciplined approach that avoids speculative positioning amid uncertain economic conditions.

ANNUALIZED SINCE INCEPTION	QUARTERLY	YTD
5.42%	0.17%	0.17%

Executive Summary

FPA New Income Fund returned 0.17% in Q1 2026 amid significant geopolitical volatility following the US attack on Iran on February 28. The ensuing conflict drove oil and commodity price increases, shifting Federal Reserve rate cut expectations and creating interest rate volatility. Manager Abhijeet Patwardhan maintained a defensive posture, reducing credit exposure from 3.6% to 3.3% as spreads remain historically unattractive. The fund deployed cash from 9.1% to 6.2% into longer-duration Treasury securities, extending portfolio duration to 3.33 years. Investment grade credit spreads showed little reaction to geopolitical events, while high yield spreads increased modestly, driven partly by AI-related fears in software debt. The manager uses a 100 basis point duration test to balance upside participation with downside protection, focusing on high-quality bonds that can break even if yields rise significantly. With 96% high-quality exposure, the fund remains positioned for patience until more attractive credit opportunities emerge.

Forward Outlook

Manager expects to remain patient and avoid uncompensated credit risk while waiting for more attractive opportunities. Will continue focusing on high-quality, liquid bonds until credit spreads widen meaningfully. Prepared to take advantage of opportunities that may arise from AI disruption in software sector.

Date	Letter	Tickers	Keywords	Pitches	Quick Takes
May 6 2026	2026 Q1	-	credit, duration, fixed income, geopolitics, Quality, Spreads, Treasuries	-	FPA New Income Fund maintained defensive positioning amid Q1 geopolitical volatility, reducing credit exposure while extending Treasury duration. Manager views current credit spreads as historically unattractive and focuses on high-quality bonds offering better risk-adjusted returns. Fund deployed cash into longer-duration Treasuries using systematic duration testing to balance upside participation with downside protection.
Feb 10 2026	2025 Q4	-	credit, duration, Fed policy, fixed income, Quality, Spreads	-	FPA New Income delivered strong 7.36% annual returns through duration positioning as rates declined, but manager shifts toward higher quality amid historically compressed credit spreads. Reduced credit exposure and increased cash while extending duration through Treasuries and AAA bonds. Contrarian quality focus aims to preserve capital in expensive market while maintaining upside optionality for when spreads normalize.
Oct 31 2025	2025 Q3	PHI	credit spreads, duration, Federal Reserve, fixed income, Quality, rates, Treasury	-	FPA New Income reduced Credit exposure and increased cash while focusing on longer-duration High Quality bonds as spreads hit historically tight levels. With investment grade and high yield spreads at zero and third percentiles respectively, the manager prioritized single-A or higher rated bonds to enhance risk-adjusted returns while maintaining upside potential from potential Fed rate cuts.
Jun 30 2025	2025 Q2	-	credit, duration, Fed policy, fixed income, Spreads, tariffs	-	FPA New Income delivered 1.65% returns in Q2 2025 despite tariff-induced volatility by maintaining disciplined focus on High Quality, longer-duration bonds. Manager avoided credit risk due to inadequate spread compensation and increased cash to 5.1%. The fund's consistent risk management approach continues generating attractive risk-adjusted returns in uncertain markets.
Mar 31 2025	2025 Q1	-	credit, duration, Fed policy, fixed income, Mortgages, tariffs, Treasuries	-	FPA New Income Fund gained 2.61% in Q1 2025 while navigating tariff uncertainty and declining Treasury yields. The fund focused on longer-duration, High Quality bonds and avoided Credit investments due to inadequate risk compensation. Post-quarter tariff announcements increased volatility significantly, but the manager believes current positioning offers multiple paths to attractive risk-adjusted returns given the uncertain environment.
Dec 31 2024	2024 Q4	-	credit, duration, fixed income, rates, Spreads, Treasuries	-	FPA New Income Fund cut credit exposure to 4% as spreads hit historic lows, extending duration instead using mathematical stress tests. Fed uncertainty and election policy risks drove Treasury yields higher in Q4. Manager Patwardhan avoids rate speculation, focusing on absolute value-based positioning in higher quality bonds while waiting for attractive credit opportunities.
Sep 30 2024	2024 Q3	-	credit, duration, Fed, fixed income, Mortgage, Spreads, Treasury	-	FPA New Income Fund extended duration into High Quality bonds as Fed cut rates 50 bps in September. Credit spreads remain historically narrow at 7th-9th percentiles, prompting focus on Treasuries and agency debt over credit risk. Manager uses 100 bps duration test to balance attractive long-term yields with downside protection in rising rate scenarios.
Jun 30 2024	2024 Q2	AAPL, AMZN, MSFT	Bonds, credit, duration, fixed income, rates, Treasury, Yield	-	FPA New Income Fund gained 0.97% in Q2 as the Fed held rates steady awaiting inflation progress. The fund continues extending duration to capture higher yields in High Quality bonds while reducing Credit exposure. Duration increased to 3.21 years from 1.39 years in 2021, positioning for attractive long-term returns through disciplined risk management.
Mar 31 2024	2024 Q1	-	credit, duration, fixed income, inflation, Mortgage, rates, Treasury	-	FPA New Income Fund gained 0.86% in Q1 2024 while extending duration to 3.04 years to capture attractive yields at 15-year highs. Stalled inflation progress reduced Fed cut expectations from six to one in 2024. The fund maintains 90% High Quality exposure and uses duration testing to balance yield capture with downside protection in an uncertain rate environment.
Dec 31 2023	2023 Q4	BLGY.AX	Bonds, credit, duration, fixed income, Yield	-	FPA New Income Fund delivered strong performance in 2023 by extending duration to capitalize on higher yields. The manager's disciplined approach uses a 100 basis point stress test to select longer-duration, high-quality bonds that enhance long-term returns while providing downside protection. Recent additions include agency mortgage pools with positive convexity characteristics.
Sep 30 2023	2023 Q3	PHIIK	active management, credit, duration, fixed income, rates, value	-	FPA New Income Fund capitalizes on 10-15 year high bond yields through disciplined duration management, increasing exposure from 1.4 to 2.2 years while maintaining limited 10% credit allocation. The price-driven approach focuses on locking in attractive long-term yields with downside protection rather than timing markets or tracking indices.
Jun 30 2023	2023 Q2	-	CLO, CMBS, credit, duration, fixed income, rates, Treasury	-	FPA New Income Fund capitalizes on decade-high bond yields by extending duration to 1.99 years through high-quality fixed-rate purchases. With yield-to-worst at 6.64% and 89.8% high-quality exposure, the fund positions for attractive long-term returns while maintaining selective 10.2% credit allocation. Manager views current environment as most compelling bond opportunity in over ten years.
Mar 31 2023	2023 Q1	-	Banking, credit, duration, fixed income, rates, Treasuries	-	FPA New Income extended duration to 1.81 years during Q1 2023 volatility driven by Fed rate hikes and bank failures. Manager actively bought longer-duration High Quality bonds while avoiding Credit investments and bank exposure entirely. Disciplined approach focuses on attractive absolute returns from investment grade bonds where prices accurately reflect underlying risks.
Dec 31 2022	2022 Q4	-	-	-
Sep 30 2022	2022 Q3	-	-	-
Jun 30 2022	2022 Q2	-	-	-
Mar 31 2022	2022 Q1	-	-	-

Date

Letter

Tickers

Keywords

Pitches

Quick Takes

May 6 2026

2026 Q1

credit, duration, fixed income, geopolitics, Quality, Spreads, Treasuries

FPA New Income Fund maintained defensive positioning amid Q1 geopolitical volatility, reducing credit exposure while extending Treasury duration. Manager views current credit spreads as historically unattractive and focuses on high-quality bonds offering better risk-adjusted returns. Fund deployed cash into longer-duration Treasuries using systematic duration testing to balance upside participation with downside protection.

Feb 10 2026

2025 Q4

credit, duration, Fed policy, fixed income, Quality, Spreads

FPA New Income delivered strong 7.36% annual returns through duration positioning as rates declined, but manager shifts toward higher quality amid historically compressed credit spreads. Reduced credit exposure and increased cash while extending duration through Treasuries and AAA bonds. Contrarian quality focus aims to preserve capital in expensive market while maintaining upside optionality for when spreads normalize.

Oct 31 2025

2025 Q3

PHI

credit spreads, duration, Federal Reserve, fixed income, Quality, rates, Treasury

FPA New Income reduced Credit exposure and increased cash while focusing on longer-duration High Quality bonds as spreads hit historically tight levels. With investment grade and high yield spreads at zero and third percentiles respectively, the manager prioritized single-A or higher rated bonds to enhance risk-adjusted returns while maintaining upside potential from potential Fed rate cuts.

Jun 30 2025

2025 Q2

credit, duration, Fed policy, fixed income, Spreads, tariffs

FPA New Income delivered 1.65% returns in Q2 2025 despite tariff-induced volatility by maintaining disciplined focus on High Quality, longer-duration bonds. Manager avoided credit risk due to inadequate spread compensation and increased cash to 5.1%. The fund's consistent risk management approach continues generating attractive risk-adjusted returns in uncertain markets.

Mar 31 2025

2025 Q1

credit, duration, Fed policy, fixed income, Mortgages, tariffs, Treasuries

FPA New Income Fund gained 2.61% in Q1 2025 while navigating tariff uncertainty and declining Treasury yields. The fund focused on longer-duration, High Quality bonds and avoided Credit investments due to inadequate risk compensation. Post-quarter tariff announcements increased volatility significantly, but the manager believes current positioning offers multiple paths to attractive risk-adjusted returns given the uncertain environment.

Dec 31 2024

2024 Q4

credit, duration, fixed income, rates, Spreads, Treasuries

FPA New Income Fund cut credit exposure to 4% as spreads hit historic lows, extending duration instead using mathematical stress tests. Fed uncertainty and election policy risks drove Treasury yields higher in Q4. Manager Patwardhan avoids rate speculation, focusing on absolute value-based positioning in higher quality bonds while waiting for attractive credit opportunities.

Sep 30 2024

2024 Q3

credit, duration, Fed, fixed income, Mortgage, Spreads, Treasury

FPA New Income Fund extended duration into High Quality bonds as Fed cut rates 50 bps in September. Credit spreads remain historically narrow at 7th-9th percentiles, prompting focus on Treasuries and agency debt over credit risk. Manager uses 100 bps duration test to balance attractive long-term yields with downside protection in rising rate scenarios.

Jun 30 2024

2024 Q2

AAPL, AMZN, MSFT

Bonds, credit, duration, fixed income, rates, Treasury, Yield

FPA New Income Fund gained 0.97% in Q2 as the Fed held rates steady awaiting inflation progress. The fund continues extending duration to capture higher yields in High Quality bonds while reducing Credit exposure. Duration increased to 3.21 years from 1.39 years in 2021, positioning for attractive long-term returns through disciplined risk management.

Mar 31 2024

2024 Q1

credit, duration, fixed income, inflation, Mortgage, rates, Treasury

FPA New Income Fund gained 0.86% in Q1 2024 while extending duration to 3.04 years to capture attractive yields at 15-year highs. Stalled inflation progress reduced Fed cut expectations from six to one in 2024. The fund maintains 90% High Quality exposure and uses duration testing to balance yield capture with downside protection in an uncertain rate environment.

Dec 31 2023

2023 Q4

BLGY.AX

Bonds, credit, duration, fixed income, Yield

FPA New Income Fund delivered strong performance in 2023 by extending duration to capitalize on higher yields. The manager's disciplined approach uses a 100 basis point stress test to select longer-duration, high-quality bonds that enhance long-term returns while providing downside protection. Recent additions include agency mortgage pools with positive convexity characteristics.

Sep 30 2023

2023 Q3

PHIIK

active management, credit, duration, fixed income, rates, value

FPA New Income Fund capitalizes on 10-15 year high bond yields through disciplined duration management, increasing exposure from 1.4 to 2.2 years while maintaining limited 10% credit allocation. The price-driven approach focuses on locking in attractive long-term yields with downside protection rather than timing markets or tracking indices.

Jun 30 2023

2023 Q2

CLO, CMBS, credit, duration, fixed income, rates, Treasury

FPA New Income Fund capitalizes on decade-high bond yields by extending duration to 1.99 years through high-quality fixed-rate purchases. With yield-to-worst at 6.64% and 89.8% high-quality exposure, the fund positions for attractive long-term returns while maintaining selective 10.2% credit allocation. Manager views current environment as most compelling bond opportunity in over ten years.

Mar 31 2023

2023 Q1

Banking, credit, duration, fixed income, rates, Treasuries

FPA New Income extended duration to 1.81 years during Q1 2023 volatility driven by Fed rate hikes and bank failures. Manager actively bought longer-duration High Quality bonds while avoiding Credit investments and bank exposure entirely. Disciplined approach focuses on attractive absolute returns from investment grade bonds where prices accurately reflect underlying risks.

Dec 31 2022

Sep 30 2022

Jun 30 2022

Mar 31 2022

QUARTER	THEMES	TAGS
2026 Q1	Credit Stress Manager views credit spreads as historically low and unattractive, providing insufficient compensation for risk. High yield and leveraged loan spreads increased modestly during the quarter but remain expensive on an absolute basis. The fund maintains minimal credit exposure at 3.3% due to poor risk-adjusted returns.	Spreads High Yield Investment Grade Credit Risk Compensation
	Rates Interest rate volatility driven by geopolitical conflict and shifting Fed expectations. Manager uses duration testing to balance upside participation with downside protection, targeting bonds that can break even if yields rise 100 basis points over 12 months. Current strategy focuses on longer-duration, high-quality bonds.	Duration Fed Funds Treasury Yields Volatility Monetary Policy
	AI Artificial intelligence capabilities are progressing rapidly and may create casualties among software companies. Fear that every software company will become obsolete has driven spreads wider on software debt. Manager sees potential attractive investment opportunities if AI fears prove overblown.	Software Technology Disruption Spreads Opportunities
2025 Q4	AI AI enthusiasm supported large-cap growth companies and drove technology earnings. Long-term capital investment in AI reflects demographic pressures and labor scarcity, supporting multi-year growth trends despite elevated valuations.	Artificial Intelligence Technology Productivity
	Valuations Equity valuations remain elevated with S&P 500 trading near 23x forward earnings, well above long-term average of 15.6x. Elevated valuations constrain longer-term returns and increase market sensitivity to earnings disappointments.	Multiples Risk Earnings
	Dollar U.S. dollar weakness, down 9.4% in 2025, provided notable tailwind for foreign assets and contributed to international equity outperformance for the first time in several years.	Currency International Emerging Markets
	Rates Federal Reserve cut rates three times in 2025, bringing policy rate to 3.5%-3.75%. Markets expect additional cuts to around 3%, though return to near-zero rates is unlikely. Higher yields have improved income potential.	Federal Reserve Monetary Policy Bonds
2025 Q3	Rates Federal Reserve cut rates by 25 bps in September after leaving them unchanged in July, describing policy as modestly restrictive. Treasury yields decreased during the quarter while the Fed wrestles with conflicting objectives of managing inflation above 2% target versus maintaining full employment.	Interest Rates Federal Reserve Monetary Policy Treasury Yields Duration
	Credit Stress Investment grade corporate spreads at 75 bps (zero percentile) and high yield spreads at 297 bps (third percentile) represent historically tight levels. Low spreads increase risk of uncompensated losses and mark-to-market volatility when bonds re-price to higher spreads during stress events.	Credit Spreads Investment Grade High Yield Mark-to-Market Liquidity
	Quality Fund focused on buying longer-duration High Quality bonds rated single-A or higher due to low spreads throughout fixed income markets. Higher quality positioning aims to mitigate drawdowns if spreads increase and provide better liquidity during stress periods.	High Quality Credit Rating Single-A Downside Protection Risk Management
2025 Q2	Trade Policy Federal government announced historically high tariffs on April 2nd, leading to significant interest rate volatility and credit spread widening. A 90-day pause announced April 9th reduced volatility but uncertainty remains about tariff levels and economic impact.	Tariffs Trade Volatility Spreads Uncertainty
	Rates Federal Reserve left Fed Funds rate unchanged citing tariff uncertainty. Treasury yields declined 5-20 bps for shorter maturities but increased for longer terms. Manager uses 100 bps duration test to identify optimal duration positioning.	Fed Funds Treasury Duration Yields Volatility
	Credit Stress Credit spreads are near all-time lows despite ongoing uncertainty. Manager views current spreads as inadequate compensation for risk and maintains minimal credit exposure at 4.4% of portfolio.	Spreads Credit Risk Compensation Exposure
2025 Q1	Rates Federal Reserve left Fed Funds rate unchanged during the quarter amid economic uncertainty. Treasury yields declined by 12-43 bps in Q1 2025, with expectations for additional cuts driven by worsening economic sentiment and tariff-related uncertainty.	Interest Rates Fed Policy Treasury Yields Duration Yield Curve
	Trade Policy Tariff announcements created significant uncertainty among businesses and consumers, leading to concerns about future economic growth and inflation. Post-Q1 tariff announcements increased market volatility sharply and created additional risks for debt investments.	Tariffs Trade War Economic Uncertainty Market Volatility Policy Risk
	Credit Stress Spreads on investment grade and high yield bonds remained at expensive levels despite slight increases during the quarter. The fund avoided Credit investments due to inadequate compensation for risk, particularly given potential tariff-induced impairment.	Credit Spreads Investment Grade High Yield Credit Risk Spread Duration
	Mortgage The fund invested in agency-guaranteed residential mortgage pools, non-agency RMBS, and CMBS as part of its High Quality bond strategy. These investments had weighted average life of 6.0 years and duration of 5.3 years.	RMBS CMBS Agency Mortgages Mortgage Pools Prepayment Risk
2024 Q4	Rates Federal Reserve cut rates by 25 bps twice in Q4 but acknowledged greater uncertainty about inflation and future cuts. Treasury yields increased 60-83 bps in Q4 as market expectations for 2025 rate cuts fell from seven to fewer than two cuts.	Interest Rates Federal Reserve Treasury Yields Monetary Policy Duration
	Credit Stress High yield spreads at 4th percentile historically and investment grade spreads at 1st percentile. Manager views credit as inadequately compensating for risk and has reduced credit exposure from 7.2% to 4.0%.	Credit Spreads High Yield Investment Grade Risk Premium Mark-to-Market
	Inflation Fed noted inflation data was sideways rather than declining toward 2% target. Presidential election outcome introduced uncertainty via potential policy changes including tariffs and immigration restrictions that could increase inflation.	Inflation Policy Changes Tariffs Immigration Economic Uncertainty
2024 Q3	Rates Federal Reserve lowered Fed Funds rate by 50 bps in September citing progress toward 2% inflation target and cooler labor market. Treasury yields declined in advance of rate cut then subsequently increased. Future path of interest rates remains uncertain due to macroeconomic conditions and looming U.S. elections.	Fed Treasury Yield Duration Monetary
	Credit Stress High yield spreads at 7th percentile and BB component excluding Energy at 9th percentile indicate narrow spreads. Investment grade Aggregate Bond Index spreads at 1st percentile. Manager finds Credit not attractively priced and continues to search for opportunities when prices adequately compensate for risk.	Spreads High Yield Investment Grade Credit Risk Pricing
	Mortgage Portfolio holds significant exposure to agency mortgage pools, agency-guaranteed CMBS, and non-agency RMBS. Agency mortgage pools were largest contributors to performance due to price appreciation from lower risk-free rates and coupon payments applied to discount dollar prices.	RMBS CMBS Agency Mortgage Pools Prepayment
2024 Q2	Rates Federal Reserve left rates unchanged citing need for greater confidence that inflation is moving sustainably toward 2%. Treasury yields increased 9-22 bps across the curve during the quarter. Higher yields over the past couple years have created an attractive opportunity to buy longer-duration, High Quality bonds.	Interest Rates Federal Reserve Treasury Yields Duration Monetary Policy
	Inflation Federal Reserve noted modest further progress toward its 2% inflation target. CPI data shows continued decline in core inflation year-over-year. Uncertainty about exact timing of rate cuts led to increase in Treasury yields despite lower inflation trends.	CPI Core Inflation Federal Reserve Target Price Stability
	Private Credit Fund holds significant exposure to business development companies and direct lending funds including Ares Capital Corp, Blue Owl Credit Income Corp, HPS Corporate Lending Fund, and Oaktree Strategic Credit Fund. These positions represent meaningful allocation to the private credit space.	BDC Direct Lending Alternative Credit Yield
	Mortgage Portfolio contains substantial mortgage-backed securities exposure across agency and non-agency RMBS, CMBS, and agency mortgage pools. Fund bought agency-guaranteed residential mortgage pools, non-agency RMBS, and CMBS backed by single-family rental properties during the quarter.	RMBS CMBS Agency MBS Mortgage Pools Housing
2024 Q1	Rates The fund discusses how uncertainty about disinflation led to increased risk-free rates during the quarter, with Treasury yields rising 25-40 bps across the curve. The manager notes that Treasury yields and High Quality bond yields are currently among the highest in over 15 years, creating attractive investment opportunities.	Interest Rates Treasury Duration Yield Curve Fed Policy
	Inflation Progress on reducing inflation appears to have stalled, casting doubt on the timeline for reaching the Federal Reserve's 2% target. The manager notes that by other measures, inflation may have accelerated, leading to reduced market expectations for Fed rate cuts in 2024.	CPI Disinflation Fed Target Price Stability
	Credit The fund maintains a 10% allocation to Credit exposure (BBB or lower rated investments) and continues to search for opportunities when prices adequately compensate for risk. The manager notes that high yield spreads have compressed to the 16th percentile despite yields remaining near 15-year highs.	High Yield Credit Spreads Investment Grade Credit Risk
	Mortgage The portfolio holds significant exposure to agency and non-agency mortgage-backed securities, including RMBS and CMBS. The fund bought agency mortgage pools and non-agency RMBS during the quarter as part of its duration extension strategy.	RMBS CMBS Agency Mortgage Pools Prepayment Risk
2023 Q4	Rates Federal Reserve held rates constant in Q4 2023 and began discussing rate cuts as inflation progressed toward the 2% target. Market expectations shifted from three to six Fed Funds rate cuts in 2024, driving Treasury yields lower in the quarter despite increases for most of 2023.	Interest Rates Federal Reserve Rate Cuts Treasury Yields Monetary Policy
	Mortgage Fund significantly increased exposure to agency residential mortgage pools during Q4, taking advantage of peak interest rates and market volatility to buy deep-out-of-the-money pools with positive convexity. These mortgages offer asymmetrically favorable upside versus downside return profiles.	Agency RMBS Mortgage Pools Convexity Prepayment Risk Duration
2023 Q3	Rates The manager discusses how rising risk-free rates drove higher overall yields during the quarter, with the Fed raising rates by 25 basis points in July. They emphasize that Treasury yields are at 10-15 year highs and investment grade bond yields are similarly elevated, creating attractive opportunities.	Interest Rates Fed Policy Treasury Yields Duration Monetary Policy
	Credit The fund maintains 10% credit exposure, viewing most credit as not attractively priced despite higher yields. The manager notes concerns about companies' ability to sustain capital structures due to decreasing debt service coverage ratios and weak protections for lenders in leveraged loans and high-yield bonds.	High Yield Credit Risk Leverage Default Risk Recovery Rates
	Duration The manager actively manages duration based on their 100 basis point duration test, increasing the fund's duration from 1.4 years to 2.2 years since end of 2021. They focus on buying longer-duration bonds that can produce breakeven returns even if yields increase by 100 basis points over 12 months.	Duration Management Interest Rate Risk Active Management Yield Curve Risk Management
2023 Q2	Rates Federal Reserve raised rates by 25 bps in May before pausing in June, with market expectations for terminal rate around 5.4% by November 2023. Treasury yields increased 60-80 bps on shorter maturities during the quarter as Fed guidance suggested additional rate increases despite inflation declining.	Interest Rates Fed Policy Treasury Yields Duration Monetary Policy
	Commercial Real Estate Fund holds significant exposure to commercial real estate CLOs and CMBS, with AAA-rated commercial real estate CLOs contributing to performance through coupon payments despite some spread widening. Portfolio includes both agency-guaranteed CMBS and non-agency commercial mortgage securities.	CMBS CLO Real Estate Commercial Mortgages Spreads
	Credit Fund maintains selective approach to credit exposure at 10.2% of portfolio, focusing on opportunities where prices adequately compensate for permanent capital impairment risk. Manager does not view credit as attractively priced generally but continues opportunistic investing in BBB-rated and below securities.	Credit Risk BBB High Yield Spreads Capital Impairment
2023 Q1	Rates Federal Reserve raised rates twice by 25 bps each in Q1 2023 to combat inflation. Bank failures in March led to expectations of reduced monetary tightening as credit contraction would provide disinflationary effects. Treasury yields declined for maturities beyond one year despite rate hikes.	Interest Rates Federal Reserve Monetary Policy Treasury Yields Duration
	Credit Stress Silicon Valley Bank and Signature Bank failures in March created systemic concerns and sharp volatility in bond markets. The one-day decrease in 2-year Treasury yields following SVB collapse was the largest in over 30 years and a six standard deviation event.	Bank Failures Credit Risk Systemic Risk Financial Conditions Volatility
	Duration Fund actively extended duration by buying longer-duration High Quality bonds with average duration of 3.9 years. Manager employs duration test to identify longest duration bonds expected to produce breakeven returns over 12 months assuming 100 bps yield increase.	Duration Risk Interest Rate Risk Bond Duration Yield Curve Fixed Income

QUARTER

THEMES

Credit Stress

Manager views credit spreads as historically low and unattractive, providing insufficient compensation for risk. High yield and leveraged loan spreads increased modestly during the quarter but remain expensive on an absolute basis. The fund maintains minimal credit exposure at 3.3% due to poor risk-adjusted returns.

Spreads High Yield Investment Grade Credit Risk Compensation

Rates

Interest rate volatility driven by geopolitical conflict and shifting Fed expectations. Manager uses duration testing to balance upside participation with downside protection, targeting bonds that can break even if yields rise 100 basis points over 12 months. Current strategy focuses on longer-duration, high-quality bonds.

Duration Fed Funds Treasury Yields Volatility Monetary Policy

AI

Artificial intelligence capabilities are progressing rapidly and may create casualties among software companies. Fear that every software company will become obsolete has driven spreads wider on software debt. Manager sees potential attractive investment opportunities if AI fears prove overblown.

Software Technology Disruption Spreads Opportunities

2025 Q4

AI

AI enthusiasm supported large-cap growth companies and drove technology earnings. Long-term capital investment in AI reflects demographic pressures and labor scarcity, supporting multi-year growth trends despite elevated valuations.

Artificial Intelligence Technology Productivity

Valuations

Equity valuations remain elevated with S&P 500 trading near 23x forward earnings, well above long-term average of 15.6x. Elevated valuations constrain longer-term returns and increase market sensitivity to earnings disappointments.

Multiples Risk Earnings

Dollar

U.S. dollar weakness, down 9.4% in 2025, provided notable tailwind for foreign assets and contributed to international equity outperformance for the first time in several years.

Currency International Emerging Markets

Rates

Federal Reserve cut rates three times in 2025, bringing policy rate to 3.5%-3.75%. Markets expect additional cuts to around 3%, though return to near-zero rates is unlikely. Higher yields have improved income potential.

Federal Reserve Monetary Policy Bonds

2025 Q3

Rates

Federal Reserve cut rates by 25 bps in September after leaving them unchanged in July, describing policy as modestly restrictive. Treasury yields decreased during the quarter while the Fed wrestles with conflicting objectives of managing inflation above 2% target versus maintaining full employment.

Interest Rates Federal Reserve Monetary Policy Treasury Yields Duration

Credit Stress

Investment grade corporate spreads at 75 bps (zero percentile) and high yield spreads at 297 bps (third percentile) represent historically tight levels. Low spreads increase risk of uncompensated losses and mark-to-market volatility when bonds re-price to higher spreads during stress events.

Credit Spreads Investment Grade High Yield Mark-to-Market Liquidity

Quality

Fund focused on buying longer-duration High Quality bonds rated single-A or higher due to low spreads throughout fixed income markets. Higher quality positioning aims to mitigate drawdowns if spreads increase and provide better liquidity during stress periods.

High Quality Credit Rating Single-A Downside Protection Risk Management

2025 Q2

Trade Policy

Federal government announced historically high tariffs on April 2nd, leading to significant interest rate volatility and credit spread widening. A 90-day pause announced April 9th reduced volatility but uncertainty remains about tariff levels and economic impact.

Tariffs Trade Volatility Spreads Uncertainty

Rates

Federal Reserve left Fed Funds rate unchanged citing tariff uncertainty. Treasury yields declined 5-20 bps for shorter maturities but increased for longer terms. Manager uses 100 bps duration test to identify optimal duration positioning.

Fed Funds Treasury Duration Yields Volatility

Credit Stress

Credit spreads are near all-time lows despite ongoing uncertainty. Manager views current spreads as inadequate compensation for risk and maintains minimal credit exposure at 4.4% of portfolio.

Spreads Credit Risk Compensation Exposure

2025 Q1

Rates

Federal Reserve left Fed Funds rate unchanged during the quarter amid economic uncertainty. Treasury yields declined by 12-43 bps in Q1 2025, with expectations for additional cuts driven by worsening economic sentiment and tariff-related uncertainty.

Interest Rates Fed Policy Treasury Yields Duration Yield Curve

Trade Policy

Tariff announcements created significant uncertainty among businesses and consumers, leading to concerns about future economic growth and inflation. Post-Q1 tariff announcements increased market volatility sharply and created additional risks for debt investments.

Tariffs Trade War Economic Uncertainty Market Volatility Policy Risk

Credit Stress

Spreads on investment grade and high yield bonds remained at expensive levels despite slight increases during the quarter. The fund avoided Credit investments due to inadequate compensation for risk, particularly given potential tariff-induced impairment.

Credit Spreads Investment Grade High Yield Credit Risk Spread Duration

Mortgage

The fund invested in agency-guaranteed residential mortgage pools, non-agency RMBS, and CMBS as part of its High Quality bond strategy. These investments had weighted average life of 6.0 years and duration of 5.3 years.

RMBS CMBS Agency Mortgages Mortgage Pools Prepayment Risk

2024 Q4

Rates

Federal Reserve cut rates by 25 bps twice in Q4 but acknowledged greater uncertainty about inflation and future cuts. Treasury yields increased 60-83 bps in Q4 as market expectations for 2025 rate cuts fell from seven to fewer than two cuts.

Interest Rates Federal Reserve Treasury Yields Monetary Policy Duration

Credit Stress

High yield spreads at 4th percentile historically and investment grade spreads at 1st percentile. Manager views credit as inadequately compensating for risk and has reduced credit exposure from 7.2% to 4.0%.

Credit Spreads High Yield Investment Grade Risk Premium Mark-to-Market

Inflation

Fed noted inflation data was sideways rather than declining toward 2% target. Presidential election outcome introduced uncertainty via potential policy changes including tariffs and immigration restrictions that could increase inflation.

Inflation Policy Changes Tariffs Immigration Economic Uncertainty

2024 Q3

Rates

Federal Reserve lowered Fed Funds rate by 50 bps in September citing progress toward 2% inflation target and cooler labor market. Treasury yields declined in advance of rate cut then subsequently increased. Future path of interest rates remains uncertain due to macroeconomic conditions and looming U.S. elections.

Fed Treasury Yield Duration Monetary

Credit Stress

High yield spreads at 7th percentile and BB component excluding Energy at 9th percentile indicate narrow spreads. Investment grade Aggregate Bond Index spreads at 1st percentile. Manager finds Credit not attractively priced and continues to search for opportunities when prices adequately compensate for risk.

Spreads High Yield Investment Grade Credit Risk Pricing

Mortgage

Portfolio holds significant exposure to agency mortgage pools, agency-guaranteed CMBS, and non-agency RMBS. Agency mortgage pools were largest contributors to performance due to price appreciation from lower risk-free rates and coupon payments applied to discount dollar prices.

RMBS CMBS Agency Mortgage Pools Prepayment

2024 Q2

Rates

Federal Reserve left rates unchanged citing need for greater confidence that inflation is moving sustainably toward 2%. Treasury yields increased 9-22 bps across the curve during the quarter. Higher yields over the past couple years have created an attractive opportunity to buy longer-duration, High Quality bonds.

Interest Rates Federal Reserve Treasury Yields Duration Monetary Policy

Inflation

Federal Reserve noted modest further progress toward its 2% inflation target. CPI data shows continued decline in core inflation year-over-year. Uncertainty about exact timing of rate cuts led to increase in Treasury yields despite lower inflation trends.

CPI Core Inflation Federal Reserve Target Price Stability

Private Credit

Fund holds significant exposure to business development companies and direct lending funds including Ares Capital Corp, Blue Owl Credit Income Corp, HPS Corporate Lending Fund, and Oaktree Strategic Credit Fund. These positions represent meaningful allocation to the private credit space.

BDC Direct Lending Alternative Credit Yield

Mortgage

Portfolio contains substantial mortgage-backed securities exposure across agency and non-agency RMBS, CMBS, and agency mortgage pools. Fund bought agency-guaranteed residential mortgage pools, non-agency RMBS, and CMBS backed by single-family rental properties during the quarter.

RMBS CMBS Agency MBS Mortgage Pools Housing

2024 Q1

Rates

The fund discusses how uncertainty about disinflation led to increased risk-free rates during the quarter, with Treasury yields rising 25-40 bps across the curve. The manager notes that Treasury yields and High Quality bond yields are currently among the highest in over 15 years, creating attractive investment opportunities.

Interest Rates Treasury Duration Yield Curve Fed Policy

Inflation

Progress on reducing inflation appears to have stalled, casting doubt on the timeline for reaching the Federal Reserve's 2% target. The manager notes that by other measures, inflation may have accelerated, leading to reduced market expectations for Fed rate cuts in 2024.

CPI Disinflation Fed Target Price Stability

Credit

The fund maintains a 10% allocation to Credit exposure (BBB or lower rated investments) and continues to search for opportunities when prices adequately compensate for risk. The manager notes that high yield spreads have compressed to the 16th percentile despite yields remaining near 15-year highs.

High Yield Credit Spreads Investment Grade Credit Risk

Mortgage

The portfolio holds significant exposure to agency and non-agency mortgage-backed securities, including RMBS and CMBS. The fund bought agency mortgage pools and non-agency RMBS during the quarter as part of its duration extension strategy.

RMBS CMBS Agency Mortgage Pools Prepayment Risk

2023 Q4

Rates

Federal Reserve held rates constant in Q4 2023 and began discussing rate cuts as inflation progressed toward the 2% target. Market expectations shifted from three to six Fed Funds rate cuts in 2024, driving Treasury yields lower in the quarter despite increases for most of 2023.

Interest Rates Federal Reserve Rate Cuts Treasury Yields Monetary Policy

Mortgage

Fund significantly increased exposure to agency residential mortgage pools during Q4, taking advantage of peak interest rates and market volatility to buy deep-out-of-the-money pools with positive convexity. These mortgages offer asymmetrically favorable upside versus downside return profiles.

Agency RMBS Mortgage Pools Convexity Prepayment Risk Duration

2023 Q3

Rates

The manager discusses how rising risk-free rates drove higher overall yields during the quarter, with the Fed raising rates by 25 basis points in July. They emphasize that Treasury yields are at 10-15 year highs and investment grade bond yields are similarly elevated, creating attractive opportunities.

Interest Rates Fed Policy Treasury Yields Duration Monetary Policy

Credit

The fund maintains 10% credit exposure, viewing most credit as not attractively priced despite higher yields. The manager notes concerns about companies' ability to sustain capital structures due to decreasing debt service coverage ratios and weak protections for lenders in leveraged loans and high-yield bonds.

High Yield Credit Risk Leverage Default Risk Recovery Rates

Duration

The manager actively manages duration based on their 100 basis point duration test, increasing the fund's duration from 1.4 years to 2.2 years since end of 2021. They focus on buying longer-duration bonds that can produce breakeven returns even if yields increase by 100 basis points over 12 months.

Duration Management Interest Rate Risk Active Management Yield Curve Risk Management

2023 Q2

Rates

Federal Reserve raised rates by 25 bps in May before pausing in June, with market expectations for terminal rate around 5.4% by November 2023. Treasury yields increased 60-80 bps on shorter maturities during the quarter as Fed guidance suggested additional rate increases despite inflation declining.

Interest Rates Fed Policy Treasury Yields Duration Monetary Policy

Commercial Real Estate

Fund holds significant exposure to commercial real estate CLOs and CMBS, with AAA-rated commercial real estate CLOs contributing to performance through coupon payments despite some spread widening. Portfolio includes both agency-guaranteed CMBS and non-agency commercial mortgage securities.

CMBS CLO Real Estate Commercial Mortgages Spreads

Credit

Fund maintains selective approach to credit exposure at 10.2% of portfolio, focusing on opportunities where prices adequately compensate for permanent capital impairment risk. Manager does not view credit as attractively priced generally but continues opportunistic investing in BBB-rated and below securities.

Credit Risk BBB High Yield Spreads Capital Impairment

2023 Q1

Rates

Federal Reserve raised rates twice by 25 bps each in Q1 2023 to combat inflation. Bank failures in March led to expectations of reduced monetary tightening as credit contraction would provide disinflationary effects. Treasury yields declined for maturities beyond one year despite rate hikes.

Interest Rates Federal Reserve Monetary Policy Treasury Yields Duration

Credit Stress

Silicon Valley Bank and Signature Bank failures in March created systemic concerns and sharp volatility in bond markets. The one-day decrease in 2-year Treasury yields following SVB collapse was the largest in over 30 years and a six standard deviation event.

Bank Failures Credit Risk Systemic Risk Financial Conditions Volatility

Duration

Fund actively extended duration by buying longer-duration High Quality bonds with average duration of 3.9 years. Manager employs duration test to identify longest duration bonds expected to produce breakeven returns over 12 months assuming 100 bps yield increase.

Duration Risk Interest Rate Risk Bond Duration Yield Curve Fixed Income

Date	Pitch Type	Author	Ticker	Company	Industry	Sub Industry	Bull / Bear	Exchange	Keywords	Action
No Elevator Pitches found

Date

Pitch Type

Author

Ticker

Company

Industry

Sub Industry

Bull / Bear

Exchange

Keywords

Action

No Elevator Pitches found

TICKER	COMMENTARY
No ticker commentary found.

TICKER

COMMENTARY

No ticker commentary found.

Ticker	Put/Call	Amount Bought	Shares Bought	% Change	Weight %
No Recent Buys Data

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Amount Bought

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No Recent Buys Data

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No Recent Sells Data

Industry	Prev Quarter %	Current Quarter %	Change
No industry data available

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Current Quarter %

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No industry data available

Investment Summary

Investor Summary

Fund Strategy

FUND PERFORMANCE AS OF 31st March 2026

Investor Letters

Latest Executive Summary:

Executive Summary

Core Thesis

Forward Outlook

Investment Themes

Credit Stress

Rates

AI

AI

Valuations

Dollar

Rates

Rates

Credit Stress

Quality

Trade Policy

Rates

Credit Stress

Rates

Trade Policy

Credit Stress

Mortgage

Rates

Credit Stress

Inflation

Rates

Credit Stress

Mortgage

Rates

Inflation

Private Credit

Mortgage

Rates

Inflation

Credit

Mortgage

Rates

Mortgage

Rates

Credit

Duration

Rates

Commercial Real Estate

Credit

Rates

Credit Stress

Duration

Investor Pitches

Current Portfolio as of ( 31st March 2026 )

Key Risks identified by Manager:

Key catalysts include:

Portfolio Implications

Ticker Commentary

Abhijeet Patwardhan Top Holdings

Recent Buys (13F)

Recent Sells (13F)

13F Sector Summary

Portfolio Distribution

Latest 13D & 13G Filings

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FPA New Income Fund