“Bond God” Gundlach says yield-seekers at risk if interest rates rise; “If interest rates rise up to 5 percent on the 10-year Treasury, you are going to get killed in a lot of these types of vehicles”

May 10, 2013 Leave a comment

Gundlach says yield-seekers at risk if interest rates rise: CNBC

Filed 12 hours ago

NEW YORK – Jeffrey Gundlach, star bond investor and the head of DoubleLine Capital LP, said on Thursday that investors who are fleeing bonds in favor of alternatives offering higher yields could suffer losses if interest rates rise.

“If interest rates rise up to 5 percent on the 10-year Treasury, you are going to get killed in a lot of these types of vehicles,” Gundlach, the chief executive and chief investment officer of DoubleLine Capital, told cable television network CNBC. Using master limited partnerships as an example, he said such investments have a lot of leverage and interest-rate risk.

Los Angeles-based DoubleLine Capital has $59 billion in mostly fixed-income assets.The Federal Reserve’s monthly purchases of $85 billion in Treasuries and agency mortgages have kept interest rates low, drawing investors into riskier assets such as stocks. The benchmark S&P 500 index is up 14.5 percent so far this year.

Master limited partnerships are publicly traded entities that can own assets such as pipelines, timber or real estate.

Gundlach, who told Reuters in early March that he bought 10-year U.S. Treasury notes earlier this year when their yields breached 2 percent, said bonds “are not going to be a terrible investment” in the short term. He said investors can earn mid-to-high single-digit returns from riskier bonds.

Gundlach also told CNBC that if interest rates rise, housing will become far less affordable because of rising interest rates on mortgages. He said he owns silver as a hedge against inflation.

Gundlach’s flagship DoubleLine Total Return Bond Fund , which oversees more than $40.6 billion, earned a three-year annualized return of 11.15 percent through April, making it the top performer among U.S. intermediate-term bond mutual funds, according to Morningstar.

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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