TOKYO, Sept 3 (Reuters) - Loomis Sayles vice chairman Dan Fuss said he has increased the portion of short-term reserves, such as U.S. Treasury securities and cash, to 35 percent in his flagship bond fund from a normal 2 percent to ensure flexibility amid geopolitical concerns.
“This is the most cautious that I’ve ever been in my over 60 years in the business. It doesn’t mean it’s the end of the world, it means that it’s a good time to be flexible,” said Fuss, one of the world’s longest-serving fund managers, who has been managing bonds since 1958.
Loomis Sayles Bond Fund is keeping the average maturity of its portfolio short as Fuss sees U.S. bond yields rising further, with the 10-year Treasury yield reaching a peak of 3.8-4.0 percent, from current levels at 2.85 percent.
“Because the short end of yield curve has come up quite a bit, this is not a painful thing to do. If we see the central bank slowing down or stopping raising rates, we can easily move on those reserves all the way out.”
In an interview with Reuters, Fuss pointed out that trade frictions and tariffs were causing “a fair amount of stress” although the economies around the world were strong.
Fuss said his credit analysts, who interviewed many corporate treasurers, found that the companies were already planning for the possibility of a slowdown.
“In a modern corporate world, when they see trouble coming, they tend to stop. Once companies start cancelling orders, the economy can turn around quickly and that would have a leveraged impact. It can happen very fast. I’ve experienced several of those,” the 84-year-old bond guru added.
As of June 30, Boston-based Loomis Sayles had $265 billion in assets under management. (Editing by Nick Macfie)