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The Crossover Strategy

A fixed income investment approach designed to optimize after-tax yield and after-tax total return.

One of the things that we are really excited about is that the U.S. Trust cross over strategy. It is uniquely designed for just this market.

Traditionally, if you paid a high tax rate, you invested in municipal securities. Municipals offered a very attractive yield, and so there was no need really to step outside of the municipal market, if you paid a high tax rate.

We're now in an environment where we need to be able to look at all of the available fixed income asset classes to find the best value. And it's surprising what you'll find. You'll find that the preconceived notion of sticking with municipals simply because you pay a high tax, won't necessarily provide you with the best total return.

So the crossover strategy really takes advantage of all of the available fixed income classes, whether it's taxable or tax exempt.

Other firms tend to separate their taxable and tax exempt into separate silos. At U.S. Trust, we use an integrated approach. We have one team that looks at all of the available asset classes. So we can easily switch from one to other and, in fact, find value where they can't, simply because they're too focused on their individual sectors.

So if there's value in short corporates, we'll buy short corporates. If there's value in long municipals, we'll buy municipals. If there's value in mortgage-backed securities, we'll buy the value there.

Our investors are not looking for increase their risk profile. They're looking for innovative solutions. And that's what we're providing.

This is unique. This is something new, and in this environment where returns are so low and risk is so high, that's very important.

IMPORTANT INFORMATION:

Investing involves risk. There is always the potential of losing money when you invest in securities.

All asset classes are not suitable for all investors. Each investor should select the asset classes for them based on their goals, time horizon and risk tolerance.

Asset Allocation cannot eliminate the risk of fluctuating prices and uncertain returns. Diversification does not ensure a profit or guarantee against loss in declining markets.

Investing in fixed income securities may involve certain risks, including the credit quality of individual issuers, possible prepayments, market or economic developments and yields and share price fluctuations due to changes in interest rates. When interest rates go up, bond prices generally drop and vice versa.

There may be less information available on the financial condition of issuers of municipal securities than for public corporations. The market for municipal bonds may be less liquid than for taxable bonds. Tax-exempt investing offers current tax-exempt income, but it also involves special risks. Income from investing in municipal bonds is generally exempt from Federal and state taxes for residents of the issuing state. Interest income from certain tax-exempt bonds may be subject to certain state and local taxes and, if applicable, the Alternative Minimum Tax (AMT).

Mortgage-backed securities are subject to credit risk and the risk that the mortgages will be prepaid, so that portfolio management may be faced with replenishing the portfolio in a possibly disadvantageous interest rate environment. Any capital gains distributed are taxable to the investor. A portion of the income may be taxable.

When the speaker references “all of the available fixed income asset classes” he is referring to those fixed income assets and asset classes that meet U.S. Trust standards and guidelines.

Opinions expressed herein are those of the featured participant, U.S. Trust Company of Delaware, and may differ from those of U.S. Trust and Bank of America Corporation and its affiliates. The information presented in this video is for discussion purposes only and is not intended to serve as a recommendation or solicitation for the purchase or sale of any type of security. This video does not constitute investment advice and is issued without regard to specific investment objectives or the financial situation of any particular recipient.

Always consult with your independent attorney, tax advisor, investment manager and insurance agent for final recommendations and before making any tax-related investment decisions or changing or implementing any financial, tax or estate planning strategy.

Investment products:

Are Not FDIC Insured
Are Not Bank Guaranteed
May Lose Value


U.S. Trust operates through Bank of America, N.A., and other subsidiaries of Bank of America Corporation (“BAC”). Bank of America, N.A. and U.S. Trust Company of Delaware (collectively the “Bank”) do not serve in a fiduciary capacity with respect to all products or services. Fiduciary standards or fiduciary duties do not apply, for example, when the Bank is offering or providing credit solutions, banking, custody or brokerage products/services or referrals to other affiliates of the Bank.

Just because you're a high-tax payer doesn't mean all of your fixed income investments need to be in municipal securities. Particularly in today's yield scarce and volatile environment, limiting your investments to a single asset class within the fixed income sector may not be the most advantageous approach. U.S. Trust's crossover strategy considers all fixed income assets — both taxable and tax-exempt — to create diversified, customized portfolios that optimize after tax yield and after-tax total return.

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