Morningstar - Q1 2022 - 61

than valuation. Most of their holdings are
agency-backed, so they aren't taking additional
credit risks.
" Over three decades, we've shown that risk and
cash flows are much better on the structured
product side. There's a lot of risk in the corporate
market that I'm not sure you're necessarily
getting compensated for, " says Jackson, " such as
M&A activity, legal risks, things like the
Equifax hack. We can get comparable quality on
the structured product side and actually
get compensated for the risk we're taking. "
These days, high demand for long-term principalonly
Treasury STRIPS has created cheap
coupon strips in the 10- to 20-year part of the curve.
" It may take five years for those to roll down
to the 10-year part of the curve where they're no
longer cheap, " Jackson says. " But because
we're not making big macro calls, we can afford
to let them work out. "
While the security selection is highly active, the
portfolio's duration always remains within
10% of the Bloomberg US Aggregate Bond Index.
(It is currently on the shorter end of that range.)
Mark Jackson and Henry Song of Diamond Hill
Capital Management.
morningstar.com/products/magazine
61

http://www.morningstar.com/products/magazine

Morningstar - Q1 2022

Table of Contents for the Digital Edition of Morningstar - Q1 2022

Contents
Morningstar - Q1 2022 - Cover1
Morningstar - Q1 2022 - Cover2
Morningstar - Q1 2022 - 1
Morningstar - Q1 2022 - 2
Morningstar - Q1 2022 - Contents
Morningstar - Q1 2022 - 4
Morningstar - Q1 2022 - 5
Morningstar - Q1 2022 - 6
Morningstar - Q1 2022 - 7
Morningstar - Q1 2022 - 8
Morningstar - Q1 2022 - 9
Morningstar - Q1 2022 - 10
Morningstar - Q1 2022 - 11
Morningstar - Q1 2022 - 12
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Morningstar - Q1 2022 - 14
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Morningstar - Q1 2022 - 35
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Morningstar - Q1 2022 - 37
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Morningstar - Q1 2022 - 79
Morningstar - Q1 2022 - 80
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Morningstar - Q1 2022 - Cover4
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