Dix Hills Partners was founded in June 2003 by Joseph Baggett, William Gordon, Steven Ruoff and Edward Goldberg with the goal of providing absolute returns in the US Treasury market that were uncorrelated with interest rate movements.  We believed this goal could be achieved by developing a purely quantitative, unbiased system that took into account macroeconomic indicators, valuation measures, and technical factors.  Over the years this original system has grown and evolved, becoming better over time.  This is consistent with our firm's strategy of "continuous improvement through research."

The origins of our firm’s investment philosophy lie in Mr. Baggett’s professional experience at the Federal Reserve Bank of New York, the Economics Department of PaineWebber, and the Quantitative Investments Group of UBS Global Asset Management. Mr. Baggett’s focus on statistical/quantitative methods is based on his early training in financial studies at the New York Fed. Since then, he has spent several years engaged in the process of assessing the direction of market interest rates, first as part of a sell-side research department and second as a fixed income portfolio manager focused on active duration management. This experience led to the conclusion that the traditional approach to interest rate forecasting (long term horizon, monitoring the consensus macroeconomic outlook and subjective implementation in portfolios) was unlikely to produce value-added results, and that a radically different approach was required. His experience with sales and trading suggested that certain higher-frequency economic data were valuable in anticipating shorter-term movements in interest rates, and he built an effective forecasting framework with those data at the foundation. While at the University of Chicago, Mr. Baggett was introduced to several behavioral finance concepts that explore the problems associated with subjective investment decision making. Having seen these problems first hand in the asset management world, he gravitated to a more systematic approach to trading that dramatically reduced exposure to those biases. While the foundation of this approach to interest rate forecasting has changed little over the years, the framework has evolved as we continue to devote substantial resources to research. For example, we’ve added/modified/replaced several interest rate indicators over the years in an ongoing effort to improve the amount of variance in bond returns that we can explain. We’ve expanded our data sets to cover a longer historical time period as the basis for indicator weightings. We’ve improved the allocation scheme that translates expected market returns into a portfolio positioning. We’ve moved from a relative return approach that is positively correlated to fixed income to an absolute return approach that attempts to produce positive returns regardless of the interest rate environment.