What do you do when yields plummet and bonds lose much of their appeal? You ignore the conventional wisdom, find relative performance, and hunt for inefficiencies caused by institutional habits.
That was what Mike Swell, co-head of global fixed income portfolio management at Goldman Sachs Asset Management (GSAM), did. He is managing director and head of structured products, overseeing $700 billion dollars in fixed income assets. He is also responsible for co-leading the global team of portfolio managers that oversee multi-sector portfolios.
Swell notes the demand for US bonds remains very high. In an era of negative bond yields overseas, U.S. bonds that yield 2, 3, even 4% remains very attractive. Swell believes the Fed is on hold for the foreseeable future, and “Lower for longer” might possibly be much longer than many believe. While there is no shortage of bonds, there is a shortage of “good bonds at good prices.”
We discuss the Biden Administration plans to implement several major infrastructure projects. When we discussed the possibility of 100-Year bonds to pay for this build out, Swell noted at current rates Treasury should issue “1,000 year bonds.”
A list of his favorite books are here; A transcript of our conversation is available here.
You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here.
Be sure to check out our Masters in Business next week with Tom Slater, head of the US equities team at Baillie Gifford, which has over $370 billion in assets under management. He serves as a decision-maker on Long Term Global Growth portfolios, and the U.S. Equity Growth Fund which is up +113% year to date. He also co-manages the Scottish Mortgage Investment Trust, which Baillie Gifford has been managing since 1908.
