Last week, WallStreetRanter posted some data and incited a pretty good thread. One of his concerns re. unconstrained bond funds and the risks they were taking on. Here is a longish article (news, not white paper) from last month, that gets into general characteristics of some of these funds, and what one can expect when they state an orientation of "absolute return" (which some of them do, and some don't.... but probably do, or will do).
http://www.institutionalinvestor.com/Article/3335100/Asset-Management-Fixed-Income/A-Brave-New-World-for-Bond-Investors.html?ArticleId=3335100&p=1[I hope this isn't something posted last month here; using the search engine for key words, and the link itself, I came up with nothing..... so I tried.... Ted]
Comments
Regarding "measurement," may I ask:
(1) where are you putting your selections on the risk/reward spectrum? Are you placing them one notch below your more aggressive bond/multi-sector/income funds, or do you put them into this pool as well (and does this depend to some degree on whether they plan to use an absolute return or total return strategy)?
(2) so far, all of these funds either state that their investing decisions will not be tied/tethered to any benchmark or they pick some bench like BofA Merrill Lynch 3-mo LIBOR Index for measuring performance over time (wow, really setting a high bar for yourself there). Where has your thinking taken you on this issue (and does it depend on AR or TR as their strategic choice)? To leave this unresolved, in my mind, seems like sloppy thinking, yet.... I dunno.
Thanks- OJ
In the end, our decision has been to hire great managers who invest differently and who are not forced to operate in a restrictive box. Understand that for our truly short-term bond allocations, we do use more traditional funds like Lord Abbett LLDYX or U.S. Global Near-Term Tax-Free NEARX. But these are more cash-substitute options, not strategic allocations like the unconstrained group. And we have a lot of dollars with Templeton's Hasenstab, who is one of the best currency evaluators anywhere. And something like Forward's KIFYX and Oppenheimer's Steel Path MLPDX are other ways to add to current income-producing investments, but they are clearly on a higher risk/reward plateau.
Regards- OJ