Load up on loans says leading bond manager Gaffney

Bond manager Kathleen Gaffney (pictured) has revealed her strategy for tapping the global loans market in her new role at Eaton Vance Investment Managers.

Speaking to Citywire Global, Gaffney, who joined the Boston-based firm as co-head of investment grade fixed income late last year, said she views the loans market as increasingly attractive given the improving macro.

‘The environment is improving and we are gradually reaching a rising rate scenario. Therefore, we have got to think about how to control our duration risk. I think, for fixed income investors that is going to mean having as many loans as possible,’ she said.

Gaffney said in her Eaton Vance Multi Sector Bond fund, which is only registered in the US at present, she sees more upside in floating-rate bank loans than in BB-rated bonds.

In addition to loans, Gaffney also said she would be looking at the convertibles bonds market. She said this was useful both in terms of diversifying her portfolio and creating access to sectors where there was little fixed income exposure.

‘If you look at the equity market where there are some beaten down areas where the stocks still have value, such as some areas of the tech sector. A number of the blue chip stocks are still attractive and they have got attractively-priced convertibles available,’ she said.

Gaffney joined Eaton Vance from in October last year, where she had worked alongside Elaine M. Stokes, Dan Fuss and Matthew Eagan on top performing US bond fund, the Loomis Sayles Multisector Income fund.

At the core of her approach, Gaffney said she would retain the same, value-orientated security selection strategy she used as Loomis Sayles but with an increased focus both on loans and floating rates notes.

So far Eaton Vance has launched one bond fund for Gaffney, which is the unconstrained, multi-sector approach open only to US investors. She co-runs the fund with Stephen Concannon and Michael Turgel.

This fund can invest 80% in US investment grade, floating-rate bank loans, non-US sovereign and corporate debt and convertibles, as well as 20% in equities.

A spokesman for Eaton Vance told Citywire Global there are plans to launch Ucits funds for Gaffney but a concrete timeline has not yet been established.