{"id":35109,"date":"2013-01-07T19:54:01","date_gmt":"2013-01-08T00:54:01","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=35109"},"modified":"2013-01-07T19:54:01","modified_gmt":"2013-01-08T00:54:01","slug":"sizemore-capital-to-move-to-active-bond-allocation","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/01\/07\/sizemore-capital-to-move-to-active-bond-allocation\/","title":{"rendered":"Sizemore Capital to Move to Active Bond Allocation"},"content":{"rendered":"

By The Sizemore Letter<\/u><\/a> <\/p>\n

The following was a memo to Sizemore Capital clients:<\/em><\/p>\n

Given the historically low yields present across the yield curve and Sizemore Capital’s view that bonds are risky investments at current prices (see “Grantham is Dumping Bonds<\/a>“<\/strong>), Sizemore Capital has opted to substitute the actively-managed Pimco Total Return ETF (NYSE:$<\/span>BOND<\/a>)<\/strong> for our traditional bond index exposure via the iShares Core Total US Bond Market ETF (NYSE:$<\/span>AGG<\/a>) <\/strong>in the Sizemore Capital \u00a0Strategic Growth Allocation<\/a><\/strong>.<\/p>\n

Additionally, we will reduce our current allocation to the iShares Barclays TIPS Bond ETF (NYSE:$<\/span>TIP<\/a>) <\/strong>by 2.5%, with the remainder being allocated to BOND. \u00a0The total portfolio allocation to bonds will remain 15%, but will consist of a 10% allocation to BOND and a 5% alloction to TIP.<\/p>\n

Our rationale is easy enough to understand. \u00a0At current prices and yields, a “buy and hold” bond portfolio offers no realistic opportunity for returns, particularly after inflation. \u00a0Rather than a “risk-free return,” we are now offered a “return-free risk.”\u00a0<\/strong><\/p>\n

But at the same time, bonds do offer value as a “shock absorber” and can play a valuable role in a dynamic rebalancing strategy.<\/p>\n

We chose BOND as an alternative because its manager–the legendary “Bond King” Bill Gross–takes a tactical approach to bond investing. \u00a0Gross is also willing and able to short sectors of the bond market he considers at risk.<\/p>\n

Gross is not infallible, and he has trailed his peers in recent years. \u00a0And in a broad sell-off of bonds, his fund would take losses along with its peers. \u00a0But in choosing BOND, we hope to get the benefits of a bond allocation–its low correlation to the equities markets–with the additional possibility of at least modest capital gains via Gross’ active management.<\/p>\n

Disclosures: Sizemore Capital is long BOND and TIP.<\/em><\/p>\n

SUBSCRIBE <\/a><\/strong>to Sizemore Insights<\/em>\u00a0via e-mail today.<\/p>\n

The post Sizemore Capital to Move to Active Bond Allocation<\/a> appeared first on Sizemore Insights<\/a>.<\/p>\n

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