beliavsky@[EMAIL PROTECTED]
wrote:
> banks have recently raised money by selling convertibles, preferred
> stock, and straight debt, as well as common stock. Suppose a manager
> is bullish on a company that has all of these types of securities
> outstanding. Buying common stock might not be the best trade.
I agree that the M* "style box" confines, and the resulting realities of
the market for mutual funds, probably present obstacles for active
managers who have good ideas about how to manage a more diversified
****tfolio. I am not aware of funds looking specifically for the
situations you describe, but you might find one in the more flexible
categories like asset-allocation funds, balanced funds, or even the
income-focused funds (that M* often categorizes as "moderate
allocation"). These categories include actively managed funds that might
identify a "pricing op****tunity" in one of several asset classes and be
able to act on it.
But it seems the manager-selection problem is amplified, and that's the
main issue (identifying a good manager before the fact). Let's assume
the approach is valid...still, you would need a fund manager that is
both a good stock manager and a good bond manager, and who can evaluate
effectively the pricing discrepancies across the different asset
classes, in particular with the relatively unusual situations where
there are multiple securities to choose from.
And ultimately the returns are going to be driven more by the top-level
asset allocation, rather than the ability to identify the "best"
security to buy for a given company. That seems like the chasing-nickels
part of the decision, but the fact that a dollar landed in bonds instead
of stocks would be more of a factor to the expected returns, so more
im****tant to the investor.
I think it's interesting as a strategy for an investor to implement, but
difficult for an investor to find in a manager. The returns are going
to be very hard to evaluate...what would you benchmark against, to
assess whether a given fund has produced above-average returns?
-Tad
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