Investment Strategy Behind a Broadly Diversified Bond Fund: Expert Portfolio Manager Daniel J. Fuss Focuses on Specific Risk and Characteristics of the Issuers

Wall Street Transcript

67 WALL STREET, New York - July 15, 2013 - The Wall Street Transcript has just published its Investing in Dividend-Paying Companies and Other Strategies Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Bottom-Up Stock Selection - Cyclical Sectors, Exposure to Emerging Markets - Large-Cap, Deep-Value - Value Oriented Strategy - High-Quality Companies - Value Investing, Deep Value - Longer-Term Investing

Companies include: General Motors Company (GM), E. I. du Pont de Nemours and Company (DD) and many more.

In the following excerpt from the Investing in Dividend-Paying Companies and Other Strategies Report, an expert portfolio manager discusses his portfolio-construction methodology and investment philosophy:

TWST: Let's talk specifically about the Bond Fund, which you manage. What is the fund's overall investment philosophy and strategy?

Mr. Fuss: The Bond Fund is a little different than many other funds in the category. The Bond Fund's focus is per dollar of investment to gradually increase the income per original unit of investment and to try to keep the net asset value rising as well. Now, that's "cake and eat it too." But that is the focus of the Fund, which means it doesn't really resemble any of the normal fixed income benchmarks.

It's called a multisector fund, though it has limits. It has to maintain an average investment-grade rating. Investments outside of U.S. and Canada can go up to 20%; Canada itself is limited to 20%, and right now we're at about 10%. And it's a broadly diversified fund in terms of number of issues.

The commonalities are that it tends to be nonmainstream fixed income, whether the rating be AAA, BBB or B. It tends not to be focused on what are known as "on the run" corporates. That has both pluses and minuses. The pluses become rather obvious in terms of return. The minus is that the portion of the fund that's invested that way has less liquidity day to day - not illiquid, certainly, but you might say average or a little below.

A more easy way to understand the Bond Fund is based on our knowledge of specific risk. We focus on the specific characteristics of the issuer and the issue both. And, as opposed to what the market is doing today, tomorrow, etc. - we do have market views, obviously - but the focus really is on the specific issuers.

We are always very concerned about reinvestment risk - what level will we reinvest the coupons and the final maturity of...

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