e-fundresearch: Mr. Stuart Spodek, you are the fund manager of the BGF Fixed Income Global Opportunities Fund (ISIN: LU0278466700). Since when are your responsible for the fund management?
e-fundresearch: Which benchmark do you adhere to?
e-fundresearch: Are you also responsible for other funds at the moment?
Spodek: Yes, among other things I also manage our Short Duration business within Fundamental Fixed Income.
e-fundresearch: What is the total volume that you manage in all your funds?
Spodek: As of 31 December 2011, I manage $24.6 billion in assets.
e-fundresearch: Regarding the performance: which performance did you achieve since the beginning of the year and in the years 2007-2011? Absolutely and relatively to the relevant benchmark?
Spodek: 2007 = 2%
2008 = -15.39%
2009 = 19.24%
2010 = 6.8%
YTD 2011 (as of 11/30) = 1.83%
e-fundresearch: How content are you with your own performance in the last years and this year?
Spodek: Overall we are content with the fund’s performance since inception, and believe we are meeting the fund objective of targeting attractive absolute returns. 2008 was a challenging year for the Fund. The BGF Fixed Income Global Opportunities Fund (“FIGO”) was early in gaining exposure to high quality sectors which sustained outsized moves and exhibited significant underperformance amidst substantial duress from heightened volatility and lack of credit availability. While events of a historical magnitude continued to transform and consolidate the global financial system, FIGO suffered as market technicals overwhelmed fundamentals in the latter part of 2008. The Fund’s allocation to investment grade financials, commercial mortgages and, to a lesser extent, non-agency mortgages significantly weighed on returns. However, we continued to believe that our holdings represented core assets that would produce attractive returns over a longer time horizon. This proved to hold true, as can be seen from the snap back in 2009.
e-fundresearch: How are you able to deliver added value for your investors with your performance?
Spodek: FIGO is our best ideas strategy for investors looking for long-term fixed income beta within a flexible mandate. We believe that an allocation to non-leveraged fixed income is one of the most compelling investment opportunities. The Fund maintains a high quality bias with an average credit quality of AA+ as well as an attractive yield profile. We are able to add value for the following reasons:
- Deep and stable investment team experienced in weathering periods of market stress
- Diversified sources of alpha across broad investment universe – limits dependence on any one sector
- Seasoned track record with proven ability to generate alpha in up and down markets
e-fundresearch: How long have you been a fund manager already?
Spodek: I joined the firm in 1993.
e-fundresearch: What were your biggest successes and your biggest disappointments in your career as fund manager?
Spodek: My biggest disappointment was the fund’s performance in 2008. In terms of successes, I would point to the fund’s performance in 2010 and 2011. Despite the difficult and trying markets, we have been able to post good returns.
e-fundresearch: What kind of capital market situation do we have at the moment? How do you act in this environment?
Spodek: We believe developed market economies are currently mired in a process of deleveraging which brings with it an extended period of low growth and low interest rates. In addition, the significant debt overhang and fragility of the global financial system give rise to significant left-tail-risks. Therefore, we expect fixed income volatility to remain elevated, with the ongoing European debt crisis as the most likely catalyst. Market participants’ speculation ahead of potential policy actions will also exacerbate volatility. In addition, 2012 is a year of major political change with presidential elections in France and the U.S., lead-up to the federal elections in Germany, and scheduled leadership transition in China. Thus policy risk will likely be at the forefront of the market’s attention, as the leaders use the policy tools at their disposal in order to boost the economies and ensure desirable political outcomes.
In this environment of low interest rates and high uncertainty, clients would benefit from having an unconstrained manager with duration flexibility and the ability to allocate to a diverse array of fixed income sectors in order to take advantage of relative value opportunities.
e-fundresearch: What are the special challenges in this environment?
Spodek: Policy risk poses a special challenge in this environment. The unpredictability of policy responses creates uncertainty that complicate investment decisions. Moreover, the effectiveness of policy actions often depends on convincing the market of leaders’ long term commitment to those policies, which can be difficult to sustain in democracies during periods of low growth and high unemployment, particularly if those policies are deflationary.
e-fundresearch: What objectives do you have till the end of the year and in the mid term for the upcoming 3 to 5 years?
Spodek: As a fund manager, my objective is always to generate good risk-adjusted returns for clients. In the next 3 to 5 years, my focus will be on continuing to build a good track record for the fund.
e-fundresearch: What motivates you in your job?
Spodek: Wanting to be the best manager and always striving to do better.
e-fundresearch: What other profession would you have taken interest in, apart from becoming a fund manager?
Spodek: If I were not a fund manager, I would have likely been an engineer.
e-fundresearch: Thank you for the interview!