Christian Charest: For Morningstar, I'm Christian Charest. National Bank Investments recently launched a new mutual fund call NBI Unconstrained Fixed Income. It's a global bond fund managed by renowned fixed income specialist Bill Gross. To talk about the new fund and the role that global bonds can play in an investors' portfolio, I'm joined today by Annamaria Testani, vice president of national sales at National Bank Investments.
Annamaria, thank you very much for being here today.
Annamaria Testani: Thank you for having me.
Charest: For our viewers who aren’t too familiar with his work, can you tell us who Bill Gross is and why this is a big deal?
Testani: Mr. Gross has an interesting background, with 42 years of experience in the industry. Some of you may remember that he co-founded PIMCO in 1971. He grew that company to an incredible size. I remember the Total Return bond fund was over $270 billion worth. In 2014 he left and joined Janus, where here he is managing his mandate as a testament to his experience.
When you look at his experience, how you define it? Well, he's won the Morningstar Fixed-Income Manager of the Decade between 2000 and 2009. He also won the Fixed Income Manager of the Year for 1998, 2000, and 2007. And he was also the first portfolio manager inducted into the Fixed Income Analyst Society's Hall of Fame. This is not someone that has a specialty in just one area. This shows someone with an incredible experience to variety of a different economic systems, political systems and presidencies. He's seen it all.
Charest: Can you describe what his investment style will be on the new fund?
Testani: As the name describes it, it's unconstrained. We're trying to give back flexibility to portfolio managers. Today, many of the mandates within mutual funds are guided by what we call the IPS, the investment portfolio statement. What that does, is dictate where and how a manager can invest in countries, sectors or even companies. When you are saying "unconstrained," you are basically saying, we call it a global fund when it really is a universe. Anywhere in the universe, we want him to take his macroeconomics that he does really well, and he does something differently. He actually comingles it extremely well from a micro-economics or bottom up perspective. When you put those two together, he then has to decide where the most opportunistic investment is, regardless of the country. The other day he was preserving capital, mitigating risk and more importantly trying to get the best return with those two factors in place.
Charest: Obviously, for a manager who's had this kind of longevity, his returns must have been pretty impressive. What can you tell us about that?
Testani: We're launching the fund this year, so we don’t have performance numbers to show what he's done here with us. However, if we go back to the previous funds that he's managed elsewhere in the United States, you see a consistent outperformance versus the benchmark and his peers. How does he do that? Well, he does it through his process. And we feel comfortable in making these statements. His awards are a testament to that. The awards are based on a very, very diligent process of evaluating each portfolio manager. They don’t just evaluate the style; they actually evaluate the results. And his results are clear, as you can see, with all the awards being a testament to his older performance.
Charest: Let's talk a little bit about the global bond asset class. Why do people need global bonds?
Testani: At the end of the day, it is about risk management. When you look at the Canadian landscape, you cannot discount fixed income. It is a necessary requirement for many people's portfolios. 60% to 65% of Canadians are balanced; in order to be balanced, you need to have a fixed income component. Unfortunately, though, in Canada we have a higher percentage of Canadians that are overly concentrated in a home country bias. In other words, they are limiting themselves only to Canada. Now what's interesting about Bill is that he can concentrate his whole portfolio in Canada, if that is the right place to be in the world to maximize the return for the risk. But if not, we've given that flexibility back to a very mature experienced portfolio manager.
Charest: And what are some of the risks that are specific to that asset class?
Testani: When you are looking at something that’s global, there are a multitude of factors that you don’t get within your own country. There is credit risk, there is political risk, there is economic risk and many more factors in just the one economy you have to work at. Again, we have to go back to the experience. Most managers tend to either be really great macro managers, and others really focus on the bottom up: every country or every investment, one at a time. His models bring both together and he does it successfully. We want to respect what's making him great and we're going to give him an opportunity to allow Canadian investors to participate in his style.
Charest: It'd be interesting to see how he does here in Canada.
Testani: Absolutely.
Charest: Annamaria, thank you very much for being here with us today.
Testani: Thank you.
Charest: And for Morningstar, I'm Christian Charest. Thank you for watching.
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