Interesting interview with manager at
http://online.barrons.com/article/SB50001424053111904034104578058681010695550.html?mod=BOL_twm_fs"Reams, now a division of Scout Investments, manages $12 billion in fixed-income assets, which include four mutual funds. Its $505 million Scout Core Plus Bond fund (the retail share class, which is three years old, is SCPYX; the institutional offering is SCPZX) ranks among the top intermediate-term bond funds for virtually every time period and has averaged a 7.8% annual return over the past 15 years, better than 99% of its peers. In the past 12 months, it's up nearly 13% and outranks 93% of the more than 1,100 funds in its category.
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Egan isn't interested in venturing out on the yield curve -- it's not worth the added risk to get the extra 20 or 30 basis points, he says. He'd rather play it safe now and put the fund's assets to work when volatility returns and spreads widen.
This pattern has played out before. "We've done this several times where we are low risk, and -- lo and behold -- the market does something, and we become interested," he says. Beginning in 2005, for example, the fund dialed back its risk so that by mid-2007 only 10% of its holdings were in corporates. "That gave us the ability to go into 2008 with enormous reserves," he says. "Our models told us to buy, and buy we did." The move back into corporates and commercial mortgage-backed securities was a tad premature; the fund lost 9.2% in 2008, more than most of its peers. But it came back in 2009 with a vengeance -- gaining 35%."
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