Mary Ellen Stanek, Chief Investment Officer of Baird Advisors, attributes a “micro-surgery” approach to her team’s success in managing the business. Baird Core Plus Bond funds and other bond funds, in this week’s Barron’s.
Stanek, writes Barron’s, “specializes in … adding base points of return and return here and there, doing old-fashioned credit analysis and picking stocks and sectors.”
Currently Stanek, who along with his team was a finalist for Morningstar Bond Manager of the Year 2016, enjoys utilities, industrials and financials.
The latter offers an attractive yield: The spread on the financial sector of the Investment-Grade Corporate Bond Index is 111 basis points, against 88 points before the financial crisis.
Financials “have more capital on their balance sheets. Regulators have curbed risk-taking activities. They are also less expensive compared to manufacturers than they have been in the past, ”explains Stanek. “By nature, we are better protected.
Stanek is not betting on the direction of interest rates, but expects Fed chief Yellen to follow through on her plan to continue to normalize rates. “She wants to have some dry powder to relax on the next downturn,” says Stanek. “We expect a couple of moves in total this year. ”
The bond bull market may be over, but Stanek doesn’t expect a substantial bear market. Aging Americans and institutional investors should be channeling more capital into the bond market, preventing the rate hike.