Premium $

HASENSTAB: INVESTING WHERE OTHERS FLEE TRANSCRIPT

June 13, 2014

Global bond fund manager Michael Hasenstab, Templeton Global Bond Fund, speaks on his contrarian investment strategies.

Consuelo Mack: This week on WealthTrack, a world traveling Great Investor who treks to unusual out of favor places to find value in shunned bonds and currencies. Why has Templeton Global Bond Fund’s Michael Hasenstab visited China, South Korea and even Ukraine recently? His contrarian views are next on Consuelo Mack WealthTrack.

Hello and welcome to this edition of WealthTrack, I’m Consuelo Mack. How does a global bond fund deliver equity like returns over the long term and stay ahead of its peers and bond markets in a low interest rate environment? By avoiding those low interest rate countries and investing in currencies and debt of faster growing emerging markets. That partially describes the strategy of next generation Great Investor Michael Hasenstab at the Templeton Global Bond Fund which he has managed for more than a decade. Hasenstab, Morningstar’s Fixed Income Fund Manager of the Year in 2010 and winner of numerous other awards oversees close to $200 billion worth of fixed income assets. Known for making sizable and prolonged contrarian investments Hasenstab is acting true to form today. At a time when many investors are fleeing emerging markets he is investing in them. When much of the world is concerned about deflation he is worried about inflation. While the federal reserve is completing its quantitative easing policy, by gradually ending its bond buying program Hasenstab is convinced another central bank, the Bank Of Japan, will more than fill the void and flood the world with inflationary liquidity. And while much of the investment community is worried about how much China is slowing he is encouraged by how much it is growing. While other investors were buying U.S. Treasuries for their safety and liquidity several years ago, Hasenstab was an early seller, a bearish position he maintains to this day. I asked him why.

Michael Hasenstab: Well, it’s a combination of factors. On the one hand we just don’t see value in the U.S. Treasury market. We have from an economic standpoint reasonably good growth, growth coming in at around three percent, inflation coming in around two percent. That is very inconsistent with a 10-year Treasury yield that is below three percent. So if you look throughout history, those type of growth and inflation dynamics would imply a 10-year Treasury yield that’s closer to four to five percent. So from a valuation standpoint it doesn’t make sense, and the reason it’s distorted is that the largest buyer of Treasuries is our own government. So because there’s an artificial buyer in place, we just don’t know what the clearing rate is. So from our standpoint we don’t see value there, and we just need to see the Fed back away and see where a real price settles out, but our inclination is that that real price will be at a yield much higher than it is today.

PREMIUM: HASENSTAB

June 12, 20140 Comments

Investing Where Others Flee

Several years ago when other investors were buying U.S. Treasuries for their safety and liquidity, Templeton Global Bond Fund’s award-winning manager, Michael Hasenstab was an early seller, a bearish position he maintains to this day. Famous for looking for bargains where others flee, Hasenstab is looking for opportunities in the Ukraine, Korea, and Malaysia with the thinking, “we have the whole world to choose from.”

CHRISTINE BENZ AND RUSSEL KINNEL TRANSCRIPT

June 6, 2014

On this week’s Consuelo Mack WealthTrack: major changes in the mutual fund industry- investors are deserting actively managed funds for passive ones and fleeing bond funds for other sources of income. In their first joint television appearance, two Morningstar veterans Christine Benz, Director of Personal Finance and Russel Kinnel, Director of Mutual Fund Research tell us what it all means for investors and their funds.

CONSUELO MACK: This week on WealthTrack: Big shakeups in the mutual fund industry. Two veteran Morningstar analysts Christine Benz and Russ Kinnel discuss the massive outflows from bond funds into other investments and from actively managed funds into passive ones. What do these shifts mean for portfolio returns? Morningstar’s dynamic duo is next on Consuelo Mack WealthTrack.

Hello and welcome to this edition of WealthTrack, I’m Consuelo Mack. There are mighty forces shaking up the mutual fund industry. The question is: are they temporary or are they revolutionary and depending on the answer how are they transforming the way we invest? No headline captured the changes more perfectly than the recent dethroning of PIMCO’s Total Return Fund as the world’s largest mutual fund, a position it has held since 2008, and its replacement by the Vanguard Total Stock Market Index Fund. Bond king Bill Gross, has become an investment legend largely because of his outstanding management of PIMCO’s flagship Total Return Fund which has beaten most of its bond competition over the years and has even delivered stock market like returns in various periods. The ascendance of Vanguard’s Total Stock Market Index Fund to the largest-fund throne symbolizes a new world order on two fronts.

Investors are now fleeing bonds after their nearly 30-year bull market and moving into stocks, which are now in the fifth year of a bull market. And perhaps even more earthshaking they are deserting actively managed funds in favor of mostly lower cost passive index funds. Vanguard of course is where index funds were created by its founder, John Bogle, in the early 1970’s. The Vanguard Total Stock Market Index Fund is a low cost way to mimic the performance of the entire U.S. stock market.

This week’s WealthTrack guests have been following the mutual fund industry to the benefit of investors for two decades. They are Morningstar veterans who are making their first joint television appearance with us. Christine Benz is the Director of Personal Finance and Senior Columnist for the firm, where she has held many other prominent positions in her 20-year tenure there including Director of Mutual Fund Analysis and Editor of several of its newsletters. She is also the author of 30-Minute Money Solutions: A Step-By-Step Guide to Managing Your Finances, which is a WealthTrack bookshelf pick. Russel Kinnel is Director of Mutual Fund Research and Editor of “Morningstar FundInvestor”, a monthly print newsletter for individual investors. He also oversees Morningstar’s fund analyst ratings, writes the “Fund Spy” column and a monthly mutual funds column for Kiplinger’s Personal Finance magazine. I began the interview by asking them to name the biggest unintended consequences of the huge shift from actively managed to passive funds.

CHRISTINE BENZ: As we’ve seen flows come out of active funds into passive products, what that has necessitated is that some fund managers are having to sell stuff to meet the shareholder redemptions, and that can cause them to have to realize capital gains to sell securities that they might otherwise want to hang onto, and so what we’re kind of bracing ourselves for, because we have had a five-year equity market rally as well is that we could see funds making bigger than average distributions this year because (a) they’re meeting these redemptions and, (b), because they simply have big capital gains on their books.

BENZ: MANAGING THE BUCKETS TRANSCRIPT

June 6, 2014

On this week’s Consuelo Mack WealthTrack: major changes in the mutual fund industry- investors are deserting actively managed funds for passive ones and fleeing bond funds for other sources of income. In their first joint television appearance, two Morningstar veterans Christine Benz, Director of Personal Finance and Russel Kinnel, Director of Mutual Fund Research tell us what it all means for investors and their funds.

PREMIUM: CHRISTINE BENZ UPDATE

June 5, 2014

Managing the Buckets

Investing for retirement and the years in retirement is one of the biggest challenges any of us face. After extensive research on the topic, Morningstar’s Director of Personal Finance, Christine Benz has decided taking the “bucket approach” is a sound strategy.

She shares more on her contrarian strategy on getting more income from your portfolio here at Morningstar.

Since WealthTrack might be pre-empted because of public television fund raising drives this weekend, we are revisiting Consuelo’s interview with two Morningstar all-stars. You can watch it here.

Back to Top