Fund firms hedging their bets

While not ready to the bond-buying spree, managers are prepping for a shift toward equities
APR 12, 2013
By  JKEPHART
Fixed-income firms aren't ready to call an end to the great bond-buying spree of the past four years — but that hasn't stopped them from preparing for rekindled interest in equities. Star bond manager Jeffrey Gundlach's DoubleLine Capital LP is the latest fixed-income-heavy asset management firm to move toward equities, with plans to launch its first equity mutual funds this year, pending approval from the Securities and Exchange Commission. Reasons for expanding, according to Mr. Gundlach, are the facts that the past decade's poor stock returns aren't likely to be repeated, and equities provide a better hedge against inflation than bonds. Pacific Investment Management Co. LLC, the world's largest bond firm, began expanding its actively managed equity lineup in 2010.

LOOMIS BLENDS TEAMS

Loomis Sayles & Co. LP, which has just $16 billion of its $185 billion of the assets it manages in equities, recently united its equity and fixed-income teams under chief investment officer Jae Park, who has overseen the growth of the firm's bond lineup since 2002. Now he is focused on getting the stock funds up to speed. “We want to position ourselves for what may be a significant growth in equity fund flows,” Mr. Park said. Investors flocked back to stock funds at the start of the year, pouring $15 billion of net new money into U.S. stock funds in January, the biggest monthly total since 2004 and the first month of net inflows in 23 months, according to Morningstar Inc. Pimco co-founder Bill Gross, who also manages the world's largest bond fund, isn't buying into the idea that the return to equities will come at the expense of bonds, because of demographics. “There are a lot of boomers,” he said. “They can't afford to see their 401(k) turn into a 201(k). Bonds are almost a necessary strategy, in most cases.” Mr. Park, likewise, said that Loomis Sayles' interest in building its equity business isn't related to worries about what will happen to the bond market.

SEARCH FOR STABILITY

“There may be short-term outflows [in bond funds],” he said. “But intermediate-term bonds won't lose that much, and when rates rise, they'll have higher yields.” There have been no signs of people tiring of bonds. Bond funds took in $31 billion in January, almost double their average monthly inflows of $17 billion over the past three years, according to Morningstar. The bottom line for the likes of Pimco and Loomis Sayles is that they want to build more-stable businesses, according to Mr. Gross and Mr. Park. “If you're an asset management firm, it makes sense to be in all asset classes,” Mr. Park said.

Latest News

JPMorgan tells fintech firms to start paying for customer data
JPMorgan tells fintech firms to start paying for customer data

The move to charge data aggregators fees totaling hundreds of millions of dollars threatens to upend business models across the industry.

FINRA snapshot shows concentration in largest firms, coastal states
FINRA snapshot shows concentration in largest firms, coastal states

The latest snapshot report reveals large firms overwhelmingly account for branches and registrants as trend of net exits from FINRA continues.

Why advisors to divorcing couples shouldn't bet on who'll stay
Why advisors to divorcing couples shouldn't bet on who'll stay

Siding with the primary contact in a marriage might make sense at first, but having both parties' interests at heart could open a better way forward.

SEC spanks closed Osaic RIA for conflicts, over-charging clients on alternatives
SEC spanks closed Osaic RIA for conflicts, over-charging clients on alternatives

With more than $13 billion in assets, American Portfolios Advisors closed last October.

William Blair taps former Raymond James executive to lead investment management business
William Blair taps former Raymond James executive to lead investment management business

Robert D. Kendall brings decades of experience, including roles at DWS Americas and a former investment unit within Morgan Stanley, as he steps into a global leadership position.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.