Best sovereign-debt bet? Not Uncle Sam

DEC 18, 2009
As the U.S. economy continues its slow crawl toward recovery, the global bond market remains rich with opportunities, according to Chris Diaz, co-manager of the $330 million ING Global Bond Fund (INGBX). “Our strategy right now involves risk seeking,” he said. “As we see the U.S. having a smaller role in the global economy, the U.S. consumer is not going to lead the recovery.” While the federal government tries to manage the country's economic woes by holding the line on interest rates — thus making government bonds less attractive — Mr. Diaz is allocating assets to countries such as Australia, Brazil and the New Zealand. Interest rates in those nations are already being increased. The fund, which is advised by ING Investments LLC and benchmarked to the Barclay's Global Aggregate Bond Index, has the flexibility to invest in any fixed-income product, but outside the U.S., it invests primarily in government-issued debt. With that in mind, most of the fund's U.S. exposure is concentrated in investment-grade and high-yield corporate debt since government bonds are yielding almost nothing these days. “In the sovereign universe, there are better places to buy bonds than the United States right now,” Mr. Diaz said. He expects to Federal Reserve to hold interest rates at current levels throughout next year as the government remains focused on the risk of deflation. His general investment theme includes leveraging the increased production and use of commodities in developing countries such as Brazil, Russia, India and China. Much of this exposure is enhanced through currency strategies that often involve owning foreign-government bonds in the local currencies, which appreciate as the value of the U.S. dollar continues to decline. “I've been bearish on the U.S. dollar for most of the year,” Mr. Diaz said. “Our currency decisions are made separate from our other investment decisions.” Portfolio Manager Perspectives are regular interviews with some of the most respected and influential fund managers in the investment industry. For more information, please visit InvestmentNews.com/pmperspectives .

Latest News

RIA dealmaking accelerates as three firms hit AUM milestones
RIA dealmaking accelerates as three firms hit AUM milestones

Wealth Consulting Group, Coastline and Maridea report fresh capital, acquisitions and asset growth as advisor M&A keeps climbing

VastAdvisor closes $1 million SAFE round from advisor-side backers
VastAdvisor closes $1 million SAFE round from advisor-side backers

Carson Group's Dani Fava, Jason Pereira of Woodgate Financial, and Sally George of Convergency Partners led the raise as the growth-tech startup builds out its AI platform and leadership bench.

Wells Fargo adds three advisor practices as recruiting rebound continues
Wells Fargo adds three advisor practices as recruiting rebound continues

New teams from William Blair, Ameriprise and UBS bring more than $560 million in combined client assets to the firm's employee and independent channels.

UBS will pay advisors 'handsomely' for banking starting next year
UBS will pay advisors 'handsomely' for banking starting next year

Regulators this year approved UBS Bank USA’s conversion to a nationally chartered bank.

SEC accuses Tricolor executives of hiding $800 million collateral hole
SEC accuses Tricolor executives of hiding $800 million collateral hole

How a subprime lender’s car-loan bonds allegedly unraveled before bankruptcy.

SPONSORED Direct indexing webinar targets tax-loss harvesting amid market swings

Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains

SPONSORED Who builds the income when the pension disappears?

Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income