FYI: Contrary to most forecasts, award winning portfolio manager Kathleen Gaffney sees a brighter growth outlook in China, the U.S. and much of the world, and is finding unusual bargains in battered areas like energy and commodities. On this week’s WEALTHTRACK, Gaffney explains why she is investing in unpopular places in her Eaton Vance Bond Fund.
Regards,
Ted
http://wealthtrack.com/recent-programs/gaffney-contrarian-bond-investing/
Comments
In going head to head Katleen Gaffney (EVBAX) vs. Dan Fuss (NEFZX) here are my findings for total return ... EVBAX ytd -13.79% and for 2014, 4.69% ... NEFZX ytd -7.62% and for 2014, 5.65%. Seems as though the additional risk Ms. Gaffney (EVBAX) has taken on thus far has been a detractor when compared to the results of Dan Fuss (NEFZX). I am going to keep NEFZX and most likely will pass on my repurchase of EVBAX anytime soon. I am thinking about opening a starter position in BAICX now that I have dialed the number of funds owned down to 45 form 52, that I once owned. I did this during my recent process of raising my cash allocation to about 25% and reducing my allocation to equities to about 50% while keeping my allocation to income at 20% and to other assets (as classified by M*) at 5%.
Skeet
In contrast, her former co-manager, Dan Fuss's Loomis Sayles bond fund is down this year too, but at half of the loss of EVBAX. In one of the recent interview Dan Fuss started to shorten the duration of bond exposure. Given the size of his funds (NEFZX and LSBRX), it would be difficult to make the changes quickly, especially when the junk bonds are thinly traded without depressing the prices more. Noted that he had similar problem back in 2008 when there was no/few buyers for junk bonds. And they were marked down at closing as if they are in free fall. Nevertheless, the large foreign currency exposure is hurting both funds when USD is strong this year. Most of Loomis Sayles foreign exposures are Canada (13%), UK (2%), and Norway (2%), whereas Eaton Vance's exposure have both developed as well EM markets including Brazil (3%), Mexico (3%), and Columbia (3%). Local EM bond index is down double digits thus far this year.
Going forward I think bond funds will face sizable headwind in rising rate environment, thus it is important to pick skillful managers. I am disappointed with Kathleen Gaffney given that she has worked with Dan Fuss for quite a while.