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Portfolio Manager Dan Fuss looks for undervalued bonds where he sees a yield premium, the potential for price appreciation, or both.
Dan Fuss and his team of credit analysts at Loomis Sayles & Company research debt offerings in the same way equity analysts research stocks. They analyze the company's financial condition in detail, as well as the terms of specific bond offerings.
They believe price appreciation can come from a variety of catalysts, including improving company fundamentals that would lead to credit upgrades, changing market supply and demand forces, and improving sector or economic trends.
Investment Process
Ideal Investment
The ideal investment for the Managers Bond Fund typically exhibits some of the following traits:
- An attractive yield, both absolute and relative to Loomis's credit research expectations
- Good call protection, particularly when prevailing rates are low
- Stable or improving fundamentals (for corporate bonds)
- Non-market relatedness to counter the impact of systematic risk
Portfolio Construction
The Managers Bond Fund portfolio:
- Primarily holds securities rated BBB/Baa or better, but may hold a small portion in below-investment-grade and unrated bonds
- Can be invested up to 10% in non-U.S. dollar denominated bonds
To mitigate some of the interest rate risk, this mutual fund portfolio may be structured with counter-cyclical elements. To that end, manager Dan Fuss may utilize convertible bonds, municipal bonds, preferred stocks, and foreign corporate and government bonds in addition to the domestic corporate bonds, which are used for alpha generation. In addition, Dan seeks bonds with call protection, either through the terms of the bond structure or through deep price discounts relative to the call price.
In deciding which securities to buy, the investment team will consider:
- The financial strength of the issuer of the security
- Current interest rates, and the asset manager's expectations regarding general trends in interest rates
- Comparisons of the level of risk associated with particular investments with the asset manager's expectations concerning the potential return of those investments.
Sell Discipline
The investment team may make a sell decision when:
- There is a change in sovereign, industry, or company fundamentals
- The issuer is downgraded by Loomis research
- Relative valuation is not consistent with its expected rating category
- Other securities or sectors offer greater total return potential
Disclosure
Investors should carefully consider the fund's investment objectives, risks, charges, and expenses before investing. For this and other information, please call 800.835.3879 or download a free prospectus. Read it carefully before investing or sending money.
The performance shown represents past performance and is not a guarantee of future results. Current performance may be lower or higher than the performance data quoted. The investment return and the principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. From time to time the advisor has waived fees or reimbursed expenses, which may have resulted in higher returns. The listed returns and yields on the Fund are net of expenses and the returns and yields on the indices exclude expenses. Current performance of the Fund may be lower or higher than the performance quoted.
There is no guarantee that these investment strategies will work under all market conditions, and each investor should evaluate their ability to invest for a long-term, especially during periods of downturns in the market.
The investment return and the principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.
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