BTS Bond Asset Allocation Programs

BOND STRATEGIES WITH THE OBJECTIVE OF INVESTING IN THE BOND SECTORS PRODUCING THE HIGHEST CURRENT RETURNS.

The programs seek to:

Here's an alternative for bond investors who seek to place their assets in the best performing bond sectors:

  • High Yield Corporate Bonds
  • Government Bonds
  • Money Market

Although millions of investors utilize bond mutual funds, few are aware of the significant differences in year-to-year rates of return among major bond fund sectors.

Bond Sector Results Can Vary Greatly

As shown in the chart to the right, the returns for major bond fund sectors can vary by large percentages year to year.

Obviously, being invested in the bond fund sector producing the highest returns - or out of bonds entirely if none of the sectors are producing positive returns - can increase total returns substantially over time.

In fact, if you were invested in the best performing sector in each of the 15 years shown in the chart at right, your average annual return would have been 14.33%1!

On the other hand, if you were invested in the worst performing sector in each of the 15 years, your average return would have been only -1.48%2!

1,2 - The results are for illustrative purposes only and are not intended to represent the past or future performance of any BTS program.

How the BTS Bond Asset Allocation Program Operates

The program consists of three types of mutual funds:

  1. High Yield Bond
  2. Government Bond
  3. Money Market

TS attempts to allocate your assets to the bond sectorproducing the highest current returns when bond prices are rising ... or conversely, to preserve capital by being out of the bond market and in money market if the bond sectors are declining.6



To accomplish this, BTS BAA portfolios use a broad range of market trend data, technical analysis and economic factors to allocate assets to the bond market sectors BTS believes will perform best in the current environment for fixed income securities.

You select the funds offered in the program with the assistance of your financial advisor unless you elect to have BTS choose your funds under the Select Option described to the right.

Total Annual Returns of Three Popular Bond Fund Sectors Over A 15-Year Period

Note: This chart is for illustrative purposes only and does not represent the future performance of any specific investment option, nor imply actual allocation recommendations. Past performance is no guarantee of future results.

3 - Morningstar, Inc., CSFB High Yield Index updated through 12-31-08. Morningstar defines the CSFB High Yield Index as an unmanaged, trader-priced index constructed to mirror the characteristics of the high yield market. The index includes issues rated BB and below by S&P or Moody's with par amounts greater than $75 million.

4 - Morningstar, Inc., Barclays Capital Long Term Government Bond Index updated through 12-31-08. Morningstar defines the BarCap Long Term Government Bond Index as including those funds in the BarCap Government index which have a maturity of 10 years or more. The returns published for this index are total returns, which include the reinvestment of dividends.

5 - Morningstar, Inc., Morningstar Three-Month Treasury Bill Index updated through 12-31-08. Morningstar determines the arithmetic mean of the investment rates on all three-month Treasury Bills issued during a given month as reported by the U.S. Treasury's Bureau of the Public Debt. Morningstar then converts the investment rate into a price and then a monthly return, using the assumption that the T-Bill is held to maturity. Three-month Treasury Bills are short-term securities issued by the U.S. government that are generally considered to be risk-free. BTS does not invest in Three-Month Treasury Bill mutual funds, but rather uses the T-Bill Index as a surrogate for the money market.

The Select Option

The BTS Select Option enables you to harness the investment research and technology resources of BTS to select the bond mutual funds used in your program.

This option offers a variety of advantages designed to optimize returns and free you and your advisor of constantly comparing and monitoring individual fund performance.

When you choose this option, BTS does this work for you by evaluating various bond mutual funds on an ongoing basis. The goal is to maintain top performing funds in your account in an attempt to produce higher returns.

The High Yield Plus Option

The BTS High Yield Plus Option enables you to take advantage of an inverse (short) high yield fund7 in addition to the other fund alternatives in the program.

When BTS projects that high yield bond prices will decline in the future, assets may be moved to a "short" high yield fund... in an attempt to produce gains during a declining high yield market.

The Plus Option adds a negatively-correlated alternative investment to your program, and the potential to increase your total return while exercising greater control of risk.

A Word About Performance

The BTS Bond Asset Allocation Program has a track record dating back to 1996.

The program offers investors an attractive alternative to buying and holding a single category of bonds. The goal of the BAA program is to enhance the performance of bond investments by assigning account assets to the bond sector that is producing the highest current returns.

Will This Program Help Meet Your Goals?

The BTS Bond Asset Allocation Programs are designed for investors who practice patience ... with the aim of achieving higher than average returns while actively managing risk and preserving capital in 3-5 year time frames.

6 - Investing in bond mutual funds carries some risks including; credit risk, which is the risk that the issuers of the bonds owned by a fund may default (fail to pay the debt that they owe on the bonds that they have issued), prepayment risk, which is the risk that the issuers of the bonds owned by a fund will prepay them at a time when interest rates have declined, and interest rate risk, which is the risk that the market value of the bonds owned by a fund will fluctuate as interest rates go up and down.

7 - Investing in short or inverse mutual funds (funds designed to profit from declining securities prices) involves certain risks that may include increased volatility due to the funds' possible use of short sales of securities and derivatives such as options and futures. The use of leverage by a mutual fund increases risk to the fund. The more a fund invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments.