Bond market veteran Dan Fuss has written to investors calling for patience as his team’s main strategies endure a period of ‘short-term pain’ caused by wider market uncertainty.
Focusing on the Loomis Sayles Bond, Loomis Sayles Strategic Income and Loomis Sayles Investment Grade Bond funds, which comprise the multi-sector portfolio range, Fuss and his colleagues said the portfolio managers were acutely aware of investor apprehension.
‘Each portfolio manager is personally invested in the funds and upwards of $176 million is invested in these strategies across the retirement plans of all Loomis Sayles’ employees – so we fully recognize the impact of the current underperformance,’ said the letter dated February 22.
‘We remain committed to our investment strategy and to improving performance. But it will take time. We are long-term investors and we ask for your patience as we work hard to navigate these difficult markets.’
The team said ‘extreme market dislocations’ often created the best investment opportunities. ‘Many of us remember all too well the market volatility of 2008 and 2011 – stressful periods for shareholders, particularly those invested in the multisector funds.
‘After these periods, our funds experienced a full recovery and provided those shareholders that remained invested with a healthy rebound,’ the team said.
Eyes on opportunities
In response, the team has built up liquidity positions across the portfolio and have committed to not becoming forced sellers in the current climate. Instead, they are focusing on three areas of the market to uncover opportunities.
These are: commodity currencies trading at lows relative to the US dollar; navigating volatility-hit equities, which has impacted energy exposure in multi-asset funds; and, stick to high yield, which the team said has had an ‘overblown’ impact with greater credit distress priced in than will be realized.
‘We remain deeply committed to the multisector strategy and its 25-year track record of achieving attractive returns. As portfolio managers, we know how important it is to let out shareholders know that there will be periods of underperformance and to communicate with transparency throughout those periods,’ the team said.
On a one-year basis to the end of January 2016, the $15.9 billion Loomis Sayles Bond Fund lost 4.33% against a rise of 1.3% by the BofA Merrill Lynch U.S. Corporate Master TR.
Meanwhile, the Loomis Sayles Investment Grade Bond fund, which is US-domiciled lost 1.6% against a rise of 3.19% by its Citywire-assigned benchmark, the Barclays U.S. Government/Credit Bond TR, over the same period to the end of January 2016.
The Loomis Sayles Strategic Income fund dropped 6.3% against a 2.6% fall by the Barclays U.S. Corporate High Yield TR over the same timeframe. All performance measured in US dollars.