Bond Fund Managers Handle Subprime Mess Easily
Kurt Brouwer September 17th, 2007
Paul Herbert at Morningstar reports that several good bond funds have handled the subprime lending mess rather adroitly:
‘…Below are managers who have navigated these conditions well–but it’s not a complete list. There are plenty of other good managers–among the big firms who run Fund Analyst Picks this would include managers at FPA, T. Rowe Price, Vanguard, to name just a few–who are doing well in this tough environment. But it’s a good bet that the managers listed below will be in a better position to pick up quality securities on the cheap when they have determined that the worst is over or nearly over…’
In the article, he mentioned three bond funds very favorably, among them two that we use:
‘PIMCO
The housing market has been at the center of PIMCO’s economic outlook in recent years, so it’s no surprise that the firm has spent a lot of time analyzing prospects of the subprime ABS market and the various ways to capitalize on its volatility. Scott Simon, head of the firm’s mortgage-backed and ABS teams and portfolio manager of PIMCO Mortgage Backed Securities (PTRIX), started calling in March 2005 for a top in home prices. His call may have been early for a while, but in 2007 he, and PIMCO for that matter, have appeared to be right.Simon, whose input on mortgages informs the work of diversified portfolio managers at PIMCO, including Bill Gross at Total Return (PTTRX), also said late last month that he wasn’t diving back into the subprime ABS market, but that he was getting closer to investing.
Western Asset
Though some of Western Asset Management’s funds, including Analyst Pick Core (WATFX) and Core Plus (WACPX) have suffered because of some weakness in its corporate-bond holdings, the fixed-income behemoth has been pretty conservative on the subprime arena. Ron Mass, who leads the firm’s structured products group, said in July that his firm has also stuck with higher-rated classes of subprime ABS…’‘…Western hadn’t been buying into lower-rated securities at the time we talked to them, but Mass said he has been a buyer of attractively valued higher-rated fare with characteristics similar to those mentioned above.’
Cream usually rises to the top. These two bond funds companies are among the tops in their field and getting through this crisis relatively unscathed is an indication that their solid reputations are deserved.
Many investors have gotten hurt during this period, but the solid, reliable, unflashy men and women who manage the best mutual funds generally survive these crises very well. However, it takes experience, street smarts and patience to avoid the lure of easy money.
In my opinion, this article is just another example of why it makes sense to invest with the pros. For more on this, see:
Buy When The Bonds Are Flooding the Street
Robert Rodriguez: Mutual Fund Switch Hitter
- Investing , Mutual Funds
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very interesting, but I don’t agree with you
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