Today's Bond Managers Have New Rules to Learn as Rate Outlook Shifts

在汤姆沃尔夫的标志性1987小说中Bonfire of the Vanities, Master of the Universe Sherman McCoy isn't a stock picker; he's a very wealthy bond trader. Like McCoy, asset managers that have focused on fixed-income investing have gotten very rich over the last three decades as interest rates have steadily fallen.

But things are about to get a lot harder for these asset managers. After an unprecedented five years of loose monetary policy in the U.S. and around the world that has pushed interest rates to historic lows, the returns investors can expect from fixed-income investments have changed dramatically. In May and June, investors got a taste of the damage that rising rates can do to bonds, whose prices fall as rates rise. In May, when Federal Reserve Board Chairman Ben Bernanke first hinted that the Fed could reduce its bond-buying program as early as this fall, prices of bonds tumbled; they fell again in June when Bernanke reiterated those comments rather than walking them back, as many in the market had been expecting. According to Cambridge, Massachusetts–based EPFR Global, which tracks individual and institutional fund flows, investors yanked $57.8 billion from global bond funds in the four weeks ending June 28. The largest mutual fund, Pacific Investment Management Co.'s Pimco Total Return fund, managed by Bill Gross, had $9.9 billion in outflows in June, after posting a negative return of 2.65 percent for the month.

The asset management industry has made a killing overseeing bond funds because of both a rise in the value of these assets as well as the scale efficiencies in managing bonds. In 2012, according to the Washington, D.C.–based Investment Company Institute, a trade group for mutual funds, investors put $304 billion into U.S. bond funds, up from $125 billion the year before. In 2009, bond funds saw a record $380 billion in net inflows. Global revenue from 2000 to 2012 for fixed-income managers grew 109 percent versus equity managers' growth of 73 percent in the same period. Among the top 10 firms on the II300,亚博赞助欧冠机构投资者annual ranking of the 300 largest U.S. money managers, are such fixed-income behemoths as BlackRock, Pimco and Prudential Financial.

Now all fixed-income managers need to change their investment process, and that won't be easy, according to a new report from Casey Quirk & Associates, a Darien, Connecticut–based consultant for investment managers. Yariv Itah, a partner at Casey Quirk, says he expected that when rates rose, investors would dump their fixed-income investments. But his research showed something different happening. Even before rates started rising in May, investors were starting to move away from core investments into different types of bond strategies. "Among retail and institutional investors, there's not much appetite to decrease their overall allocation to fixed income. But there is a huge shift into other types of debt investments than they are in now," says Itah. Casey Quirk expects that as investors face uncertain bond markets they will shift $1 trillion of assets — about 15 percent of their portfolios — away from traditional fixed-income areas such as core, core plus, government bond and benchmark-oriented strategies tied to popular indices. Those funds will be directed toward what Itah calls next-generation debt investments, including global bonds, emerging market bonds, high-yield and bank loan investments, structured products and portfolios managed to protect investors' principal against the ravages of inflation.

会有赢家在新的景观。管理rs who can manage portfolios opportunistically and find returns from multiple sources will be in high demand. Itah expects revenue from these strategies to rise 60 percent by 2017, at which point they will represent 80 percent of the annual revenue from U.S. fixed income investors.

固定收入新时代的获奖者往往是那些不能轻易归类的投资策略。William Eigen, who manages $30 billion in an absolute return, fixed-income strategy for J.P. Morgan Asset Management called the Strategic Income Opportunities Fund, says people thought he was crazy five years ago when he started talking about the need to decouple fixed-income portfolios from popular indices. The goal of Eigen's strategy is to beat the risk-free rate, typically U.S. Treasury yields, by a margin of two to eight percentage points a year, on average, regardless of the level of interest rates or spreads. But Eigen's fund doesn't fit neatly into a style box based on duration or credit quality.

“如果有人不喜欢我们的过程，那是因为它是非传统的，”eIgen说，谁领导了大桥资本管理的固定收入组，直到他于2008年加入了jpmam。“如果你所做的一切都是根据各种改变你的投资传播产品或兴趣率敏感产品的形式，然后猜猜是什么？你将一直容易受到这两个因素的影响，“基于波士顿的eigen说。“所以如果利率出错的方式或风险保费出错的方式，那么你会失去大量的投资者。”2008年，基金的表现是积极的，尽管大多数债券基金都有负回报，但有些人失去了30％。2011年，该基金具有平坦的绩效，而其他一些资金显着提升，因为他们敢打赌，率将从记录低点移动到甚至更低的记录低点。

J.P. Morgan's Strategic Income Opportunities Fund has three separate portfolios: Opportunistic beta, which invests in sectors such as high yield and emerging markets; alpha, which includes synthetics, correlation trades and relative value; and a hedged portion that can include taking short positions. Since the launch of the fund, as well as an offshore version, performance has been negatively correlated to the Barclays Aggregate bond index.

首席执行官Jeffrey Gundlach和CIO of Los Angeles–based DoubleLine Capital, which has amassed $60 billion in largely fixed-income assets since its debut in 2009, was a pioneer in getting away from benchmarks and actively moving money among different bond asset classes depending on market outlook. Benchmark hugging "is the wrong way to look at fixed income," says Gregory Uythoven, director of marketing at DoubleLine, who has a background in quantitative analysis and sits on DoubleLine's fixed-income asset allocation committee. "Inherently it's flawed. You own the largest issuers and, unlike in an equity index, the largest issuers in debt are the ones with largest amount of debt. Then in a crisis, those guys are compromised."

Uythoven表示，封闭式资金是管理无约束的固定收入组合的另一种方式，因为它们是永久的资本池，可以使用杠杆并做短销售。4月，双层电线为一个封闭式最佳思想基金提高了23亿美元，称为收入解决方案，可以投资新兴市场债务到银行贷款的高收益债券。但Uythoven强调，这些类型的基金需要大量的劳动力，分析部门和个人问题。“它不像旧的核心加上固定收入，你只是根据宏观观看划分的扇区分配，”他补充道。双层大线还于7月1日向公众开展了浮动率战略。

Casey Quirk's Itah says this next generation of debt investments will blur the line between active management and alternatives. Traditional asset managers should expect a significant amount of competition from alternatives firms in developing products that dump benchmarks, invest across the capital structure, use derivatives, shift to dynamic risk management and even invest money directly in deals.

Nick Gartside，JPMAM的伦敦国际首席投资官固定收入，回应了这一观点。“我们从固定收入投资者只有一个维度的思维奢侈的时间转过来。现在他们需要多维思考，”包括​​不同的地理位置，行业和货币。

固定收入的新世界将需要资产管理人员的大量变化，包括PIMCO，TIAA-CREF和Vanguard集团等债券巨头。Rick Rieder，BlackRock的基本固定收入的首席投资官员和美洲固定收入的联合主管称，“我们正在达到一个人们正在考虑不同地管理固定收益的拐点。”他补充说，Blackrock Investors对多元化的核心固定收入组合表示兴趣。Blackrock的战略收入机会基金，类似于类似的J.P.Morgan基金具有灵活性，可以灵活地投资于政府债券到高收益率的宏观和绝对回报策略，在过去两到三个月中出现了显着流入。然而，Rieder强调，“这不会是核心的旋转，并进入战术不受约束的战略，而是迈向多元化。”

Not everyone is ditching benchmarks for an unconstrained approach to fixed income, though. Insurance companies and pension funds are just two examples of investors that will want to continue to use benchmark-oriented strategies for reasons such as matching assets to long dated liabilities, managers say. Even in BlackRock's traditional core fixed income, the firm is being tactical, keeping its interest rate exposure lower than the benchmark would suggest.

Michael Gitlin, head of fixed income at Baltimore, Maryland–based T. Rowe Price, says clients will increasingly want more customization, including global multi-sector strategies and funds that offer protection against rising interest rates and inflation. But he is skeptical of claims that investors will rapidly shift 15 percent of their allocations from traditional fixed-income areas to so-called next generation investments. "There will be plenty of people who want benchmark-oriented strategies even if the benchmark is dominated by Treasuries, agencies, mortgages and investment-grade credit that is lower yielding," says Gitlin. He explains that many investors will want to use part of their fixed-income allocation as an alpha generator, while others will use bonds and credit for traditional reasons like principal preservation, reasonable income and liquidity.

Gitlin adds that the recent popularity of unconstrained investments in fixed income is partly the result of investors searching for yield and taking on more risk in the process. These investments have done extraordinarily well, but those results have been achieved in a very strong credit cycle that is not likely to repeat anytime soon, he says. "If people are thinking that the next five years will look anything like the past five years, they're probably wrong," he says.

A generation of bond managers has grown up in a world defined by falling interest rates. The future will be different, if uncertain. "Asset managers with traditional bond portfolios have a legacy challenge and risk missing out on this shift in demand," says Casey Quirk's Itah.