You're watching...
Kathleen Gaffney, Eaton Vance portfolio manager, on starting a bond fund and why she believes now is a good time to take credit risks.
Also in this playlist...
Auto-advance: ON
Auto-advance
This transcript is automatically generated
Despite warnings of a -- a bubble a -- money pouring into stock funds see Eaton Vance is launching a new bond fund so -- on the opportunities in fixed income let's bring in for the -- funds portfolio manager Kathleen Gaffney.
Vice presidents at Eaton Vance Kathleen thanks so much for joining us.
I was reading some of the headlines and comments of the being coming out we've been hearing about this bond bubble for so long.
Goldman Sachs says be prepared for a bomb to market explosion that Bill Gross of Pimco saying.
He's calling for a credit supernova.
So why some now a good time to -- a bomb found.
Now is not the easiest time to start a bond fund but it is a good time to start a multi sector fund.
One in which you're able to be flexible.
Is with a different fixed income sectors that you're focused on.
Clearly rates are are low and not sustainable here and at some point in rates start rising.
Investors are gonna want to have a lot of tools to navigate very choppy markets.
You say the challenge is finding the right bombs that the right price for what criteria -- have you do that.
You want good credits.
It's a good time to be taking credit risk.
And you want to make sure that that bond that you loan has very little.
Sensitivity.
To interest rates so that means looking at bonds that might have more equity like characteristics.
Such as convertibles or floating rate bank loans which.
Very little -- -- rescue and -- able to take credit risk there so there are many options to consider at this point.
You know they had defense writing eighty billion dollar checks every month.
Which I guess is he's keeping his bond bubble -- it exists inflated.
Does that put you off long term -- bombs to look more for the front end -- intermediate term bonds.
I look form bonds didn't different.
Maturity types.
At the long end if it there are opportunities if credit is attractive.
So for example.
Technology company or -- cyclical credit that's more levered to.
Good cash flow as the economy recovers.
Intermediate term bonds if -- a little bit more concerned about.
Rates moving up and very often in the high yield market that tends to be the tenor of of those bonds.
What about some of the -- high yield corporate bonds -- like that sector.
That's Specter is a little bit worrying and that and we've seen tremendous amount of flows into bond funds everyone's looking for a little bit more yield.
That -- to be absolute level of yields to come way down even in corporates.
And I would say you're taking on a little bit too much interest rate risk for some of those higher quality bonds.
-- the talk about the amount of money that's coming out of fixed income and going into the stock market.
What's -- take -- that there -- others is say.
A lot of that money is from those special dividends that was handed out at the end of last year on -- still an awful lot of money in bonds.
There is an off a lot of money in bonds I think since 2006.
1000000000004.
Came into bond funds and mainly plain Vanilla bond funds where.
-- overall exposure is governments and high quality corporates.
Even last year 250.
Billion.
So -- the flows have been strong.
I think it's gonna take quite a shock for investors to realize that once interest rates start moving up you're going to be looking at negative returns.
And that's the message that I think they needs is to take cut to higher rate now.
Very good flatly today Kathleen Gaffney -- Eaton Vance -- Kathleen thank you so much.
-- question is when do interest rates go up maybe not in the near future but -- hanging out there.
