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London. Septuagenarian bond investor Dan Fuss jokes that the best decision he ever made was choosing his long-lived parents.

After 51 years in fixed income, Fuss shows no sign of flagging and says he has asked human resources at US fund house Loomis Sayles to arrange his official retirement for the first month after his funeral.

Fuss joined the Boston-based firm, now owned by France’s Natixis, in 1976 and still heads its flagship Loomis Sayles Bond fund, which has some $19.35 billion under management.

The fund underperformed its peers in late 2008 and early 2009, but it was up 38 percent in the 12 months to the end of April, according to Lipper data. It also beat its peers in the Lipper Global corporate Bonds sector by 20 percentage points.

Fuss came to the bond markets after serving in the US Navy during the 1950s, where he said his mentor “Duke” Windsor taught him the importance of being aware of everything around him.

A holistic approach to investment has been useful in the past two years. With a secular rise in interest rates now on the cards, Fuss is substituting specific risk for market risk.

“When the wind is in your face, you have to adapt — you have to shelter yourself by having specific elements in the portfolio that are positive, despite the general trend of interest rates,” he said.

Fuss currently favors investment grade corporates, such as Intel, Wellpoint and Comcast over sovereigns in an attempt to balance liquidity with yield and at the end of March had nearly 25 percent in high-yield names.

But his biggest bet is in two-year Canadian government bonds, which Fuss says is a tactical position.

Canadian interest rates are higher than those in the United States and the credit direction is largely stable, but the main bet is on the currency, which recently climbed to its highest level in two years after the Bank of Canada indicated that an interest rate rise might come as early as June.

Fuss likes Canada’s fiscal discipline and pointed to Canada’s funded pension system compared with the pay-as-you-go retirement system in the United States, where he is steering clear of T-bills on supply fears.

Fuss is also finding ways of tapping the Asian growth story without being held hostage to currency controls by seeking bonds from international entities borrowing in currencies like the Indonesian rupiah and the Korean won.

He cited examples like the Asian Development Bank or a United States or European company borrowing money locally, like McDonald’s in Singapore.

Born outside Milwaukee, Wisconsin, Fuss took a business administration and naval service degree at Marquette University in Milwaukee. At the time he made his decision, the Korean War was raging.

“The navy would pay for your tuition and books, and you got a heavy uniform coat which was good for our cold winters,” Fuss recalled. In return, he served three years and became a signal officer on an aircraft carrier.

He left the navy in 1958 and went to work for a small suburban bank in Wisconsin, the Wauwatosa State Bank. After various roles at banks and asset managers, Fuss joined Loomis Sayles, where he has been ever since.

Throughout his long career, he says he has learned the importance of changing his strategy to fit the times.

“When I started out in fixed income, interest rates went up for 23 years with only short-term interruptions,” he said. “Then they started to go down and that made life more difficult.

“I had to get up earlier and earlier until I was getting up at 4.23 a.m. With interest rates going up again, probably for a long time, I look forward to sleeping in.”

 

Reuters