According to Thiru, its performance in tough times also speaks for itself. Markets experienced huge negative returns during the European sovereign crisis in 2011, the commodity collapse in 2015, the selloff driven by Fed rate hikes in 2018, and now through the pandemic in 2020. The years following each of these crisis, however, were banner years for the fund.
Thiru said: “It is because we were able to buy things cheaply. Part of it is that you have to have a good temper, you have to be disciplined and you have to stick to your process. And when the market comes your way, that’s when you execute your plan.
“We were underweight equities this year, but it was well calibrated because we expected a market sell-off, maybe not as much as it did, but the point is, we were looking for direct sell-offs and we capitalized. did.”
The fund, with current yields of around 4.3%, has stood up well in a rising rate environment and while Thiru expects inflation to moderate, it will remain high by historical standards, meaning yields will be higher and investors satisfied. Will be However, he cautioned that investors should be wary of TIPS — Treasury inflation-protected securities — because they come with much longer duration and interest rate sensitivity. The Fed, too, is buying TIPS and will have to dump them back into the market, creating additional headwinds.
The fund has about 85% allocation to bonds, of which 37% is in high-yield bonds, a share that Thiru said will increase as it gets cheaper. and cherry picking and buying companies they know well; The fund has been able to generate high coupon income over a given period of time, which its equity peers can only dream of. Names like Rogers, Enbridge and AMC, high-yield quality companies work for the fund’s three- to five-year time horizon and a 5-7% return target.
