For Fidelity’s Ford O’Neal, one of life’s greatest lessons came in the field of lacrosse. The portfolio manager, who has worked at Fidelity for 30 years and manages more than $155 billion in assets, played the sport in high school and at Harvard University. He said one of the main skills he learned was teamwork, which helped him reshape the firm’s fixed income strategy more than 25 years ago. ”[It] “Obviously my love of playing team-based sports was the driving force,” said O’Neill, who also coached his adult children’s youth teams. I…do we need a star system?” he told CNBC. The theory is that you are dependent on one person. He on my team was able to try and review with 2, 3, and 4 people, so we decided a team-based approach would be better. He was named Morningstar Fixed Income Manager of the Year in 2016. “Ford helped found Fidelity, which built a reputation as a home for prominent stock pickers,” Morningstar’s Dan Culloton wrote about O’Neal’s nomination in April. , who began his career in investment banking after graduating from Harvard University.After meeting with Fidelity to pitch an initial public offering, O’Neill said, “Neal pulled one of the portfolio managers aside and asked him, “How can I get a job at the firm?” So O’Neal went to Wharton and took a summer internship at Fidelity.” With his MBA, he was hired as an analyst and a few years later was promoted to portfolio manager. ”[I] “I absolutely love what I do every day. It’s a great job and I’ve never wanted any other job in the last 32 years,” he said. The Fidelity Total Bond Fund (FTBFX) has $35.8 billion in assets and Morningstar has given it a 4-star and Gold rating from December 2004 to the end of March 2024. Morningstar said its annualized return of 3.7% was higher than the 3.3% of the typical intermediate core-plus bond Morningstar Category fund and the 3.1% of its benchmark, the Bloomberg U.S. Aggregate Bond Index. “But what really sets O’Neill’s record apart is its record,” said Morningstar’s Culloton. “Not only did we outperform, we did it with lower volatility, as measured by standard deviation, and shallower drawdowns.” O’Neal’s interests also include the Fidelity Total Bond ETF (FBND), which has a 30-day SEC yield of 5.46% and an expense ratio of 0.36%, according to Morningstar. FBND 1Y Mountain Fidelity Total Bond ETF Year-to-date He This fund is considered core-plus, meaning managers can add high-yield or other alternatives to the core option of diversified high-quality bonds. FTBFX currently holds 87% of its assets in investment grade bonds. Mr. O’Neill noted that Fidelity’s clients are not looking to bonds to drive performance, but rather as a source of income, capital preservation and diversification compared to stocks. “We all want to outperform the benchmark, but we do it in a risk-managed environment,” O’Neill said, adding that the team does not make big bets on interest rates or currencies. “It’s kind of the old thing: create alpha, manage risk, rinse and repeat,” he added. “The thought was that if you do well, you’ll be in the top half of the competitive world in a short period of time. But if you do it consistently, year after year, all of a sudden the money starts coming in. Top quartile. , [or] 5-year, 10-year, and now 20-year time horizons will yield even better results. O’Neill emphasized that fixed income teams can also benefit from working with equity analysts when talking to corporate executives, public institutions and government issuers. “It’s a very well-known equity group, but it’s also a fairly well-known fixed income group, so we’re going to have so-called executives coming to us,” O’Neill said. If you’re talking to just the equity team or the fixed income team, and they’re both in the Fidelity room, they “need to play in the middle,” he said. “Not only access, but then we had two very, very frank conversations with these people,” he said. Where O’Neill sees opportunities He believes a soft landing scenario is the most likely outcome for the economy at this point, with the Federal Reserve steering monetary policy and eventual interest rate cuts. . As a result, U.S. Treasuries are now the largest holding in the portfolio, he said. He particularly likes US Treasuries in the 4-year to 7-year categories. “These rates will benefit the most when the Fed starts lowering rates, because they could fall faster than longer-term rates because the curve could invert and then steepen,” he said. We think there is a high possibility that this will happen.” He said. US5Y YTD Mountain 5-Year U.S. Treasury Bond Yields are near record highs, while credit spreads, particularly investment grade, are near record lows, O’Neill noted. “If you’re a buyer of nominal yield, you’re going to find the market very attractive. If you’re a buyer of relative value of credit, it’s a very, very difficult market today,” he said. Mr. O’Neill and his team also continue to maintain some exposure to high-yield and leveraged loans, which they consider attractive. “Spreads are also narrower than they were a year ago, but as long as we believe the U.S. economy continues to head for a soft landing, yields are still well above investment-grade yields,” he said.
Top bond fund manager Ford O’Neill reveals his ‘secret sauce’ for outperformance
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