Looking for two cents? This fund manager finds bonds concerning

The Reformed Broker shares one of his favorite fund managers with The Monitor. Dennis Stattman is not a household name, but Brown thinks he is one of the greatest asset allocators in the history of the industry.

Brendan McDermid/Reuters
The U.S. flag hangs outside the New York Stock Exchange in this November 2011 file photo. The Reformed Broker takes his cues, in part, from one of his favorite fund manager, Dennis Stattman.

Dennis Stattman (BlackRock Global Allocation) is not a household name fund manager but he is truly one of the greatest asset allocators in the history of the industry.  I've been an investor with his fund for almost a decade now, he's been at it since 1989.

I'm always interested to see how Dennis is positioned asset class-wise and geographically given that he has a mandate to go anywhere he sees a good risk-reward profile.  Right now, he is very concerned about the risks in bonds; he's carrying a 50% lower bond weighting than his world allocation fund peers ...

From Investment News:

“To put it simply, I think the bond market in general is bad value right now,”...

The 10-year Treasury, which is currently yielding 1.66%, is of particular concern to Mr. Stattman. “With that yield, it's easy to imagine losing an entire year's coupon in a single bad trading session,” he said. “That's really disturbing to me.”...

“With TIPS you have to go 16, 17 years out on the maturity to get a break-even yield,” he said. “There's a great deal of risk in high-yield right now, too. The default rate is about as low as it's going to get, and the momentum of the economy is not encouraging.”

Mr. Stattman's fixed-income outlook is contrarian to the general investor community. Year-to-date through the end of May, investors had put over $110 billion more into taxable bond funds than they had taken out, compared with $80 billion of net inflows over the comparable five-month period last year, according to Strategic Insight.

Lots of people express concern about bond risk, not many (according to the flows) have actually stopped buying them though.

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