67 WALL STREET, New York - January 24, 2014 - The Wall Street Transcript has just published its current Value Investing and Other Strategies Report. This special feature contains expert industry commentary through in-depth interviews with highly experienced Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: Small Cap Investing - Value Oriented Strategy - High-Quality Companies - Upside in Small-Cap Stocks - Bottom-Up Stock Selection - Portfolio Diversification with Closed-End Mutual Funds - High-Grade Fixed Income Securities - Sector Rotation Investing
Companies include: International Fixed Income Securities
In the following excerpt from the Value Investing and Other Strategies Report, an experienced fixed income security portfolio manager discusses his outlook for interest rates and bond returns for investors:
TWST: Can you give us an overview of your sleeve of the AST New Discovery Asset Allocation Portfolio, and how it's structured in relation to the other funds?
Mr. Allen: We manage the Core Plus fixed income portion of the AST New Discovery fund. There are two fixed income sleeves in there; one is Core Plus, one is Core. Core Plus is essentially similar to Core - about potentially between 60% to 100% of the portfolio is our Core portfolio. But the manager has the discretion to use up to 20% of the international securities and also additional 20% of below-investment-grade securities, and this differs from a Core fund, which is basically linked to the Barclays Aggregate benchmark.
TWST: Can you give us some idea of your holdings and what your process is like for choosing holdings, as well as what your valuation techniques are?
Mr. Allen: Our holdings are centered around the different fixed income sectors, the components of the index, which are U.S. Treasury bonds, investment-grade corporate bonds, mortgage-backed securities, agencies and CMBS. Those are the main components of the Barclays Aggregate. In the Core Plus fund we in addition operate at our discretion below-investment-grade and international bonds. Within those sectors, there is quite a significant diversion in performance as you move through either a financial cycle or an economic cycle.
What we seek to do is basically shift between those different sectors to try and capture excess return over the index. So an extreme example would be 2008, where Treasuries performed exceptionally well and investment-grade corporate bonds significantly underperformed Treasury, so at the end of 2008, we basically sold our overweight position in Treasuries and moved into what we considered at that time to be undervalued corporate bonds. So as we move through the cycles, we have all these sectors available to us to basically seek out relative value.
TWST: What has the market environment been like over the past year, and do you see these trends continuing? What do you see ahead?
Mr. Allen: This year has actually been quite a different year for - quite a watershed year for fixed income, because a lot of people are concerned that normal interest rates are reaching the end of potentially a 30-year cycle...
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.