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Goldman Takes Aim At This "Superstar" Bond Manager, Hinting He Could Be The Next "Third Avenue"
Earlier this morning, we laid out a list of junk bond-focused mutual funds which based on their atrocious YTD performance, have the highest risk of being the next to follow Third Avenue in gating and/or liquidating, noting that Catalyst, or Nuveen or Franklin are most at risk.
Now, in its post-mortem note analyzing the "death" of the Third Avenue fixed income fund, Goldman's analyst Alexander Blostein presents just who it is that Goldman itself is focusing its sights on as the next fund to suffer gating and/or liquidations (hint: it is among the names listed above).
Here is Goldman, first with its own take on TFCVX:
An AMG affiliate, Third Avenue Management announced that it will be liquidating its US focused high-yield bond fund (TFCVX; ~$790mn in AuM) as redemptions are outpacing the fund's ability to liquidate its assets without a fire sale. Shareholders will be gated in the meantime.
Bottom line: This highlights to us the degree of illiquidity in certain parts of the high yield fixed income market, and the resulting risks to managers especially amidst accelerated redemptions. Moreover, we have seen elevated redemptions from taxable bond funds recently (-$65bn 2H15 vs. +$51bn 1H15), driven by outflows from high yield funds, which may remain elevated from here amid heightened risk aversion, with price declines exacerbated by liquidity concerns. We believe BEN (Sell) is most at risk given greater HY holdings as well as the recent deterioration in performance.
- Performance and flows: YTD TFCVX is down 22% (-890bps excess performance), ranking 99 percentile relative to peers per Morningstar. Per eVestment, holdings include Caesars, and other sponsor-backed leveraged buyouts, and management commentary also highlighted that some investment have undergone recent restructuring. On the back of weak performance, the fund has seen accelerated outflows (-$680mn YTD vs. +$630mn in 2014).
- Liquidity process: In order to liquidate the fund in an orderly fashion, redemptions from the fund will be gated from here. Management said that existing shareholders will receive interest in the liquidating trust (which will be managed without fee), and cash distributions will be made over time. The full process may take up to a year or more per management commentary. The impact to AMG is likely immaterial, given that it is <1% of total firm AuM.
- Read-across: This is a more extreme outcome of illiquidity in HY fixed income markets, and the risk is greater for smaller managers such as TFCVX, due to more concentrated holdings and shareholder base. That said, we think this is a negative read-across for other HY managers amidst rising redemptions.
And the punchline:
Amongst our coverage, BEN (Sell) is most exposed with 30% of fixed income holdings in high yield securities per eVestment, and with 37% of fixed income exposed to emerging market debt in particular. Importantly, Templeton Global Bond ($100bn in total; $59bn in mutual funds) – BEN’s largest fixed income fund – has seen meaningful outflows YTD (-$7.6bn from retail; -13% annualized rate) and could persist given the deterioration in excess performance (-460bps vs. benchmark YTD).
High yield fixed income has faced net redemptions YTD; BEN most exposed in our coverage:
We find it ironic if Templeton Global Bond's 41-year-old "superstar" manager, Michael Hasenstab...
... after being lionized by the media for years due to his bets on central banks bailing out each of his investments, is finally Lehmaned by none other than Goldman Sachs (a Lehmaning of one the largest US-based bond funds which, needless to say, would not only promptly reverse the Fed's tightening ambitions but unleash more QE and NIRP on very short notice).
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China, from the Goldman Provence , will be Disappearing, questioning and reprogramming him soon.
transferd to Shanghai devision of "Who Flung Squid".
The poor guy looks like shit.
The entire list is doomed, the only question is in what order do they implode......
He looks like a genius, front running the fed buying up his junk
This chap best prepare for a good talking to at the Holiday Party next Friday.
Could be worse. They could be taking 2-and-20 for the privilege of losing your money. Fortunately this fund only charges about 50 bps (depending on which share class you buy). Sucha bargoon.
Golden special reserve Vaseline???
don't worry about hasenstab. he got plenty.
Since the article never gives the TICKER for the Templeton Global Bond fund, here it is: TPINX
https://www.franklintempleton.com/investor/products/mutual-funds/overvie...
This one's gonna hurt because this fund is used in a lot of retirement plans.
Here's their "Investing for What's Next" ad:
https://www.youtube.com/watch?v=nsF1l7MLr7g
On the way in it's all very polite. "Oh, hello, how very nice to see you. Welcome to the club. Everyone is looking forward to meeting you"
On the way out it's a survive-at-all-costs rush for the door- people being trampled, broken bones, severed limbs, blood everywhere.
That second part rarely makes it into the Prospectus.
There's always a reason not to invest in anything. The long term track record of TPINX is solid. Some things you simply have to decide to own (not trade), and let the power of compounding work for you. I wouldn't worry too much about Templeton Global Bond. Decide for yourself:
http://www.morningstar.com/funds/xnas/tpinx/quote.html
Try explaining his brillance in front running the FED with 37% expoeure to EM markets. If he is front running the EM Central Banks then take a look at the foreign reserves in these places. The reserves are more likely to be conserved for currency defenses than for their EM Bonds. This guy has been one of the sharpest shooter. Does he know something that we don't.
It's understandable for a Jew to bet the Jews on the Fed will continue to give away the taxpayers' money to Jewish bankers on Wall Street. It's perfectly clear.
So he gets "Lehmanized", and he can't sell at the bottom because he can't sell shit, and similar activity across all illiquid credit funds caused Fed to flip from +25bp to ZIRP then NIRP then QE4 then Helicopter Money....so he just needs to sit back and hold on, right?
Just kidding. Hope he goes down in flames. But so far seems that you are fine career-wise so long as EVERYBODY flames out at the same time. Same old story.
Had a gun to my head since 2013 to load up on HY. Dodged a bullet and past the hump in 2014 so far so good.
May 2013 told some potential clients about risk in HY and also liquidity risk in HY ETFs. One asshole in the audience actually laughed out loud. Suck on this one douchbag.
Interesting that Goldman is trying to eliminate the competition, kinda like they did to Bear and Lehman.
*Performance and flows: the fund has seen accelerated outflows
*Liquidity process: redemptions from the fund will be gated from here.
*Read-across: and the risk is greater for smaller managers amidst rising redemptions.
Replace the words fund & managers with Country and the micro/macro match-up is identical to what will happen increasingly more often going forward in this planned crash by the globalists. As seen already in places like China, Brazil etc.
Have you hugged your favorite globalist today?
Is that a wrinkled tie or what...
just kidding.. looks like the sharks are starting to eat each other. If Goldman puts something out in writing.. it means they got the opposite sitting in a derivative somewhere private
Hedgefunds need to SHORT THESE ARSEWHOLE'S HOLDINGS!
Make the fuckers start JUMPING OUT WINDOWS!
They already have, thus the performance. I will be looking to buy into this fund shortly as the crowds are always wrong.
Uh, Puerto Rico???