A Meaningful Reduction in the Average Maturity of a Multisector Bond Fund: Expert Money Manager Daniel J. Fuss Discusses New Money Flows and Reinvestment Strategies with The Wall Street Transcript

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: Are you putting more or less focus on any particular sectors, or investment grade versus below investment grade, or the like?

Mr. Fuss: Over the last two years we have gradually reduced the average maturity of the fund to the shortest we've been, I think, ever. We're still, relative to most bond funds, a bit on the long side. We have an average maturity right now of approximately 7.5 years, whereas a couple of years ago it would run 10.5 years to 13 years. So this is meaningful. That was done more with the new money flows and obviously some maturities and then a lot of reinvestment.

The Bond Fund, more than most funds, has a lot of reinvestment, so the monthly dividend gets plowed back by a large portion of the holders. That's gradually changing as some of the original holders get into their retirement years, but it is still preponderantly reinvestment. You can adjust structure that way as opposed to selling and buying.

When a particular sector is really out of favor, we're looking hard at it. We want to see what the specific companies in that area are doing, or, in the rare case when something gets really out of line due to an imbalance between supply and demand, we have to have solid knowledge of the individual credits. If we don't have that, then we can't go forward because we don't really understand the specifics. If we do have the details then we can evaluate what we think is fair value and what we think is deep value and proceed. Sector dynamics in the corporate arena clearly will be factors.

Perhaps the best example ever, for obvious reasons, was the banking sector. That's still not all the way back in line with normal but certainly in the fall of 2008 and then in the aftermath and still periodically along the way, that area has represented by and large good value - great value for a while - probably not much excess value a month ago and now represents reasonable...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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