Last month we purchased Fidelity Limited Term Bond (FJRLX) in our model portfolio. Part of our strat...
Not Just Treasuries
08/12/2014 10:10 am EST
Michael Cuggino discusses two bond funds, one that offers an unconstrained flexible strategy and the other that can act as a short-term cash vehicle.
SPEAKER 1: Hi. I’m here with Michael Cuggino, President and Portfolio Manager of The Permanent Portfolio Funds, and we’re here today to talk about his bond funds. He has two of them. What are the two funds, Michael?
MICHAEL CUGGINO: Yeah, we run Versatile Bond Portfolio, which is an unconstrained flexible bond strategy and Short-Term Treasure Product, which invests in short-term Treasury bills, notes, and bonds designed to be a liquidity or a short-term cash vehicle.
SPEAKER 1: Is there a yield on the short-term money?
MICHAEL CUGGINO: At this point, no. I mean the short-term rates being what they are and the treasury market, I mean the cost of running the fund outweigh yields at this point but over the long-term, we think when rates eventually go up, it will be a place where investors can put some short-term liquidity.
SPEAKER 1: So, investors use the Short-Term Bond Fund just instead of going into bonds themselves as a basket?
MICHAEL CUGGINO: Well, the other portfolio, probably the one with more broad application will be Versatile Bond, which is a flexible portfolio. That has a duration, we have flexibility on duration and the types of issues we can invest in that fund.
SPEAKER 1: Not just Treasuries or just Treasures?
MICHAEL CUGGINO: Not just Treasures.
SPEAKER 1: Corporates.
MICHAEL CUGGINO: Corporates, governments, US, non-US, convertibles, preferreds, so the spectrum of what we can invest on in Versatile Bond Portfolio is a lot broader, hence the flexible mandate that we have. In addition, we can go to cash or we can extend out maturity so we look at the overall interest rate, market environment, and determine where the best risk/reward is in the bond market and try to go there.
SPEAKER 1: Where do you find that best risk/reward right now? What are some of the top positions you have?
MICHAEL CUGGINO: Well, at this point, in duration, we’re about six or seven years out and probably three-quarters investment grade so we’re looking at high quality, reasonable yields in the intermediate space but not going too far out on the risk curve, not chasing distressed debt, high yield, asset back or leverage banked.
SPEAKER 1: Can you share a few names of the investment grade stuff you might be into?
MICHAEL CUGGINO: Some of the names would be PB Energy in the coal space, a name that’s been beaten down on the equity side for obvious reasons with coal, but strong balance sheet and we think a company that will be able to pay their obligations on time and probably has some capital appreciation upside as well.
SPEAKER 1: And what’s the yield on that one?
MICHAEL CUGGINO: Off the top of my head, I don’t know, but we’re probably exceeding market rates for roughly a short to intermediate-term bond.
SPEAKER 1: Excellent. What are the tickers of the two bond funds?
MICHAEL CUGGINO: PRVBX is the flexible bond fund, Versatile Bond Fund, and PRTBX is the short-term Treasury product.
SPEAKER 1: Excellent. Thank you, Michael.
MICHAEL CUGGINO: Thanks for having me.
SPEAKER 1: Thanks for joining us again.
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