Daniel Fuss, manager of the $18 billion Loomis Sayles Bond Fund, cut his U.S. Treasury holdings in favor of non-U.S. markets that haven't been...
Daniel Fuss, manager of the $18 billion Loomis Sayles Bond Fund, cut his U.S. Treasury holdings in favor of non-U.S. markets that haven’t been hit as hard by the credit shortage.
Fuss, vice chairman of Boston-based Loomis Sayles, reduced his U.S. Treasury investments by more than two-thirds in the six months ended March 31. One-fifth of the fund’s assets are now in non-U.S. bonds, led by Canadian securities at 9.4 percent.
Loomis Bond climbed 4.4 percent over the 12-month period ending June 25, more than 64 percent of rivals, according to data compiled by Bloomberg.
Bond managers, including Curtis Mewbourne, of the $2.4 billion Pimco Diversified Income Fund, have put larger portions of their assets outside the U.S. The Chinese and Russian economies are still “fairly robust,” said Mewbourne, who has increased holdings in countries such as Brazil.
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The Pimco fund, which has 37 percent of assets in emerging-markets debt, gained 2.4 percent in the past year ending June 25, ranking it ahead of 75 percent of peers.
Bond investors are struggling to balance attractive yields with risk because of a credit crunch triggered by the collapse of subprime mortgages last year.
Yields on U.S. Treasurys have fallen as investors have fled to the safest government-backed debt. Within the U.S., the bond-fund managers said they are investing in corporate debt. Fuss has reduced his U.S. Treasury holdings, while adding to corporate bonds and high-yield debt.
His fund holds 3 percent in Treasurys, down from 10 percent last September, and 18 percent in high-yield credit.
“One thing I get excited about is high-yield bonds,” Fuss said. He helps oversee $50 billion, including accounts for institutional investors.
Mewbourne said hybrid securities issued by U.S. banks such as Citigroup offer good opportunities for bond investors.
“There’s a pretty good certainty that big banks in the U.S. aren’t going to default,” Mewbourne said.
Pimco Co-Chief Executive Mohamed El-Erian said investors are reassessing risk amid the credit turmoil and the emerging might of developing economies.
Pimco, a unit of Munich-based Allianz, is the largest manager of bond assets, with more than $800 billion. Loomis Sayles, a subsidiary of Paris-based Natixis, manages $130 billion in bonds and stocks.