Former PIMCO Employee Beats Gross at His Own Game

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While Mohamed El-Erian’s departure from PIMCO garnered most of the headlines, he is not the only high profile employee to depart the bond giant in the last twelve months. Marc Seidner, an ally of El-Erian quit the bond giant 48hrs before El-Erian’s departure was announced.

Seidner, who was seen as a close confident of El-Erian having previously worked together at the Harvard University endowment fund, reportedly turned down an offer to become one of Gross’s top lieutenants.

Seidner opted instead to leave the swaying palm trees of Newport Beach, heading back to the East Coast to become head of fixed income at the Boston-based money management firm run by contrarian investor Jeremy Grantham.

Here, Seidner is free to make his own investment choices and no longer has to seek approval for his trades from the “Bond King”. Seidner’s first trade was a somewhat counter-intuitive call that bond yields would fall, not rise further as many had predicted.

Seidner sensed that last year’s Treasury market upheaval triggered by speculation about when the Federal Reserve would start reducing its bond-buying stimulus – the so-called “taper tantrum” – had left pockets of value in some longer-dated bonds.

Fast forward six months and Seidner’s bet was on the money. His core U.S. bond fund is outpacing 98 percent of its peers and easily beating Gross’s PIMCO Total Return Fund, the world’s biggest bond portfolio, as the yield on the 10-year Treasury note has fallen roughly 60 basis points this year.

While there is a huge difference in the size of the two funds – it is much easier to maneuver with a smaller fund like Seidner’s – both funds are regarded as directly comparable for bond investors.


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Municipal Bonds

Bond Case Briefs: – S&P widens lead over Moody’s as bond upgrades surge: Muni credit. – Standard & Poor’s is pulling away from Moody’s Investors Service in the business of grading U.S. municipal bonds. Janney Montgomery Scott LLC’s Tom Kozlik says the gains reflect local governments shopping for the best ratings.

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WSJ: – Bonds, not bailouts, for too big to fail banks. – Too big to fail remains unresolved in the U.S. Last week the Federal Reserve and the Federal Deposit Insurance Corp. said that not one of the nation’s 11 largest banks could fail without threatening the broader financial system. The news came after regulators reviewed the banks’ “living wills,” the emergency plans required under the 2010 Dodd-Frank law.


Treasury Bonds

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Catastrophe Bonds

The World Bank: – Disaster Risk: Using capital markets to protect against the cost of catastrophes. – the World Bank Treasury has been helping our clients protect their public finances in the event of a natural disaster. The most recent innovation is our new Capital-at-Risk Notes program, which allows our clients to access the capital markets through the World Bank to hedge their natural disaster risk.


Investment Strategy

Donald van Deventer: – Kinder Morgan energy partners leads the 20 best value bond trades, August 11, 2014. – We show that investors have not demanded more spread as default risk goes up, which is why ranking “best value” by the spread to default ratio is important.


Bond Funds

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Reuters: – U.S.-based bond funds post $8.2 billion outflows, biggest since Aug. 2013. – Investors in U.S.-based mutual funds pulled $8.2 billion out of bond funds in the week ended Aug. 6, marking their biggest weekly outflows in nearly a year, data from the Investment Company Institute showed on Wednesday.


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