Manager Review
New Capital’s fund is managed by Michael Leithead, who is supported by a longstanding relationship with Stratton Street Capital led by Andrew Seaman and Mark Johns.
According to FE Advisory, Leithead focuses primarily on global fixed income fund management and is a member of the fixed income asset allocation committee.
Johns and Seaman previously ran Investec’s global, European and US dollar high income funds.
The Pimco fund is managed by four individuals to ensure 24-hour coverage of the fund, he said. Andrew Balls is the CIO and lead manager. The other three managers are Sachin Gupta, Lorenzo Pagani and Tomoya Masanao. They have been working in the firm for ten years.
Pagani and Masanao are strategically situated in Munich and Tokyo, respectively, which provides them with a local perspective on the actions of the central banks in Europe and Japan, Tan said.
Fees
The latest ongoing charges (OCF) of the New Capital fund is 1.25% and for Pimco it is 1.39%.
Tan said the fees are comparable to their peers.
“The difference could be attributed to New Capital investing only in direct cash bonds while Pimco invests in a wider variety of instruments,” he said.
Conclusion
Given the Pimco fund’s comparatively broader and more layered opportunity set across instruments in the developed bond market, it is well-suited to be a traditional core investment, Tan said.
“The fund’s geographic diversification within the developed markets generates lower volatility and negative correlation to the equity market.”
However, comparing the two funds, Tan said he prefers the New Capital product, primarily because of its unique credit selection process, which has created a portfolio that is quite different from its global bond peers.
“The fund is a good addition to any portfolio given its low correlation with other global bond funds. We also appreciate the portfolio manager’s timely and substantiated calls for exposure to the undervalued and less crowded bond spaces, which have contributed to the fund’s performance.”
While the fund is a good diversifier, investors should be mindful that the outperformance of the fund comes with higher volatility and maximum drawdown, he added.
