Staying Stable in an Uncertain World
Phoenix-Goodwin Multi-Secor Short Term Income
David L Albrycht
Author: Dave Jennings
Last Update: , :
|David Albrycht has 22 years experience in credit analysis, more than enough to learn a few valuable lessons in fixed-income investing. As a result, the Phoenix-Goodwin Multi-Sector Short Term Income Fund he's managed for over 10 years has a standard deviation ranked in the top 2% in the category while keeping the total return over that time within the top 15%. Deep research is the key, with backing from 12 fixed-income sector managers.
||Phoenix-Goodwin Multi-Secor Short Term Income|
Technical considerations to us involve what is driving the market. And, if it's not fundamental, can you still play it? For example, I might know that there is a large order in the market for Brazil exposure of multiple billions. Those are some of the secrets of the trade as to how you get your information when you get to 10-plus years experience. We can do that from a technical perspective. From a value perspective, we can put money into something we feel has good fundamental value.
Q: Why do you say you have a duration neutral approach incorporated into the fund?
This is one of the cornerstones of our process. We don't guess interest rates. At the portfolio level, we are neutral to that of our benchmark and peer group. In other words, I'm not going to give you 40 reasons why rates are going up and lo and behold, I'm wrong because there was one major event that caused rates to go the opposite way. As you know, Economics 101 would say that simple supply and demand imbalances move markets, However, it's more what expectations are than actual numbers that come out that move markets. I donít think you can guess rates at the portfolio level. You leave that to the economists with their staffs of 40 people down on Wall Street to be wrong 14 out of 16 times on where rates are going. You let them guess with their team of professionals and then revise their outlook. We add value by picking sectors, by making issue selection bets in a small, diversified fashion and ultimately adding less volatility with more certainty to a portfolio's total return.
Q: There are so many attractive areas worldwide in fixed income it makes all the eggs in one basket approach become less attractive in the current rate environment. Can it stay this way?
It's sort of uncanny, but our product works best in a stable rate environment. It works in a gradual rising environment where spreads tighten quicker than rates tick up. In a downward rate environment, because it's a bond product, you also do well. Obviously if spreads blow out due to some extreme event, a terrorist event we wouldn't ever want to see, then we would slightly under perform.
Q: Do you believe the fund is well positioned despite talk of an inevitable rise in interest rates?
Again, if you're convinced rates are going up and you tell your bond fund manager to shorten his duration tremendously and lo and behold we have a terrorist event, which causes a massive flight to quality and rates drop precipitously, guess what? You just blew up your fund because you guessed rates wrong. You didn't make your small, consistent bets into issues and sectors. That's not our philosophy. It's hard to do. One of the best bond fund managers in 1987 was a guy that managed a 30-year Treasury fund of long duration. The market blew up; he returned 30%. He was on the cover of Barron's. The next two years, he got crushed, because rates went against him.
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