Key Fixed Income Portfolio Takeaways

November 19, 2015

ETF.com hosted its annual Fixed Income conference this month at the beautiful Island Hotel in Newport Beach, California. The event was a huge success, with more than 300 people coming for two days of hard-hitting education, content and networking.

We had a killer speaking lineup, including fixed income luminaries like DoubleLine’s Jeffrey Gundlach, BlackRock’s Rich Rieder and PIMCO’s Mihir Worah.

Here are my six key takeaways from the event:

1. Fixed Income ETFs Are Going to Be Big

This is a little self-serving, but my biggest takeaway was that fixed-income ETFs are going to be big. The sessions were jammed from start to finish, and attendance was up sharply from last year. Our internal target for attendance at the event was 200-300 people, and we beat the high end of that, with 310 registering. The audience was a nice mix of advisors and institutional investors, with a higher skew toward institutions than in years past.

Fixed Income 2015 Audience

That last fact is interesting. Surveys suggest that institutions are moving into the fixed-income ETF market in a major way, and our attendance trends suggest that’s the case.

2. I Want to Buy Closed-End Funds

There, I said it.

Jeffrey Gundlach is a gripping speaker. Never afraid to speak his mind, he delivers piercing insights in an easy-to-understand manner (one of the reasons we’ve also asked him to keynote our Inside ETFs conference in January).

Fixed Income 2015 - Jeffrey Gundlach

His keynote speech in Newport Beach was full of interesting ideas—buy India, sell junk bonds, avoid oil—but the one that stuck with me the most was his recommendation to buy fixed-income closed-end-funds. Gundlach noted that closed-end bond funds are selling at double-digits discounts to their net asset value, and the highest discounts ever, excluding 2008. Meanwhile, many are yielding more than 10 percent.

While I’m genetically predisposed to dislike closed-end funds—I work at ETF.com, after all—his comments definitely caught my attention. Leveraged yields, decent managers and narrowing discounts can combine to create strong returns in closed-end funds, and this may be lining up as one of those rare moments when it’s time to buy.

3. People Love TIPS for 2016

With inflation humming along at almost zero, owning Treasury inflation-protected securities—or TIPS as they are referred to—is like watching paint dry. But from the opening keynote to almost every panelist throughout the day, presenter after presenter said the same thing: Boring old TIPS may have the most attractive risk/reward ratio of any asset in the market.

Fixed Income 2015: Mihir Worah

TIPS are currently pricing in inflation rates of just over 1 percent for the next 10-plus years. If actual inflation runs higher than that, TIPS will outperform traditional Treasurys. A lot of our panelists—including our opening keynote speaker, Mihir Worah of PIMCO—found that a likely scenario.

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