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Highlights of our Meeting with Nuveen Asset Management Fixed Income Strategy & Portfolio Manager

Our investment team loves that we can discuss ideas with the brightest minds in the investment field. Last week, Doug Baker from Nuveen Asset Management visited our office for a meeting with our investment team.  Doug is the head of the Preferred Securities Sector Team and a member of the Fixed Income Strategy Committee at Nuveen which oversees nearly $950 billion of assets.  The strategy he manages is in many of your accounts.  Fixed income experts are usually quite dull and boring (it is a lot of math), but Doug communicated the complex nuances of the fixed income market with lots of passion and energy.  Debate and highlights of the meeting include:

  • Recall that one of our themes coming into this year was the opportunity in the financial sector.  Owning preferred securities plays into this theme, as banks are significant issuers in the preferred securities space.  Doug shares our view that the financial health of the US banking sector is in great shape.  Western European banks are selectively attractive, as they are playing catch up to US banks to improve their balance sheets as new regulatory requirements kick in next year.
  • There are many opportunities in the preferred securities market.  Yields of 5.5% are available for investors needing income.  Active management that focuses on deep dive analysis of individual companies is a must in the sector.
  • Near term worries which may lead to increasing volatility include Brexit negotiations and Italy’s negotiations with the European Union over its budget and fiscal policy.
  • Rising rate concerns are overblown – the 10-year treasury bond will likely be range bound.  The Federal Reserve will continue to hike short term interest rates.  Based on current data, only 2-4 more interest rate hikes are likely through 2019.  The odds of hikes in 2020 are nearly zero.  Doug’s portfolio is currently set up to dampen the impact from unexpected higher interest rate shocks.

We thank Doug for taking the time with us and wish him continued success.