Some global fixed-income managers are touting their rebirth: Additions to investment staff, tweaks to investment process and improvements to risk management have righted the ship and delivered strong post-crisis performance, bond firm executives say.
Now, as the next few quarters wipe the poor performance of 2008 and early 2009 from three-year track records, these managers are hoping their improvements will attract new clients.
Unfortunately, it's not that simple, warn investment consultants, who are looking much more closely at what managers have learned from the crisis than how well they've performed.
Aberdeen Asset Management PLC, AllianceBernstein LP, Pacific Investment Management Co. LLC and Western Asset Management Co., among others, were hurt by poor performance and outflows through the crisis, but have taken steps to turn things around. Each has improved performance, but that might not be enough for some to recoup assets.
Strong global bond performance in the past 2½ years has been “largely a function of the market” for most managers, said Moustapha Abounadi, director and head of fixed-income research at consultant Rogerscasey Inc., Darien, Conn. “The things that have gotten those managers in trouble — risk assets — have come back strongly in 2009 and 2010.”
Ed Britton, London-based senior investment consultant and head of fixed-income manager research at Towers Watson & Co., said: “Good three-year performance will hide an awful lot of bad ways of getting there. Particularly now, performance can be even more misleading if you don't look at the whole picture.” That's because an extreme market drop in 2008, followed by an extreme rebound in 2009, make it harder to judge whether returns were a result of manager skill or luck.
Managers realize performance isn't everything.
“Performance is your ticket to the dance. Once you get to the dance, you need to distinguish yourself from your competitors,” said James W. Hirschmann, CEO and president of WAMCO, Pasadena, Calif.