Dan Roberts Co-Portfolio Manager Mainstay Unconstrained Bond Fund
Seeking higher returns and protection against an eventual rise in interest rates, investors have been turning to non-traditional “unconstrained” bond funds. According to Morningstar, nontraditional bond fund assets have more than doubled to a record $151.5 billion last year, from $62.5 billion in 2011. On this week’s WEALTHTRACK, an exclusive interview with an award winning portfolio manager who is an expert in this field. Dan Roberts of the five-star rated MainStay Unconstrained Bond Fund explains why investment flexibility is so critical in today’s complex markets.
CONSUELO MACK: This week on WEALTHTRACK, escaping the bonds of traditional fixed income investing. Award winning fund manager Dan Roberts reveals the strategy secrets of his MainStay Unconstrained Bond Fund in a rare interview next on Consuelo Mack WEALTHTRACK.
Hello and welcome to this edition of WEALTHTRACK, I’m Consuelo Mack.
Ever since the financial crisis we have been talking about the unprecedented steps central banks have taken to pump money into the world’s financial system, thereby lowering interest rates and making borrowing more affordable to companies and countries.
The trend continues. As you can see from this chart, courtesy of this week’s guest, the balance sheets of major central banks have exploded since pre-financial crisis days: up more than 500% at the Federal Reserve, neary 500% at the Bank of England, nearly 300% at the Bank of Japan and almost 200% at the European Central Bank.
One of the consequences of these policies has been to lower interest rates, which simultaneously drives up the prices of bonds. By just about any measure bonds are expensive and their yields around the world are historically low.
That combination challenges the primary reasons for owning bonds in the first place, for their income and price stability. It’s also created a serious dilemma for investors. What to do with their bond portfolios?
One answer is to consider nontraditional bond funds, also commonly known as “unconstrained”. These are fixed income funds that can invest just about anywhere in the world, in many cases can invest in other asset classes like stocks and can go short. They have become very popular with investors searching for higher returns and protection against an eventual rise in interest rates.
According to Morningstar, nontraditional bond fund assets have more than doubled to a record $151 billion last year from $62.5 billion in 2011.
This week’s guest co-manages one of the highest rated ones. He is Dan Roberts, Co-Portfolio Manager of the MainStay Unconstrained Bond Fund which carries a five-star rating by Morningstar and has for the second year in a row received a Lipper fund award for its “consistently strong risk–adjusted performance relative to its peers”.
Roberts, a PhD economist is the Head and Chief Investment Officer of Global Fixed Income at MacKay Shields which he joined in 2004. But his bond team has been together for more than 20 years and has specialized in managing asset allocation funds, high yield bond portfolios and also long/short strategies which have recently become widely used in that now very popular nontraditional bond fund category.
MacKay Shields is a wholly owned, but independently run subsidiary of WEALTHTRACK sponsors’ New York Life/ MainStay Investments. Roberts is here because of his recognized track record.
I began the interview by asking Roberts what difference having an unconstrained bond fund rather than a traditional one makes in today’s markets.
DAN ROBERTS: When we think about the traditional bond funds and we think about unconstrained, first of all the differences between the two are that the unconstrained bond fund and the traditional bond fund have different durations.