Bond Portfolio Expert Sees Value in Managing US Dollar Denominated Fixed Income Securities

December 19, 2018

Peter Strzalkowski, CFA, serves as Co-Team Leader of OppenheimerFunds’ Investment Grade Debt team and is a Portfolio Manager of the Total Return Bond Fund, Oppenheimer Limited-Term Government Fund and Oppenheimer Limited-Term Bond Fund. Before joining the firm in August 2007, Mr. Strzalkowski served as Managing Partner and Chief Investment Officer of Vector Capital Management, LLC, a structured products money management firm he founded.

In this exclusive 3,464 word interview with the Wall Street Transcript, Peter Strzalkowski details the best fixed income investments in his portfolio:

“When it comes to asset-backs, we’re definitely overweight, and I’m not sure if we’re overweight versus our competitors, but we definitely have an overweight in asset-backs, specifically auto ABS. We do not hold any student loan ABS. We have a small allocation to credit card ABS, and we have a small allocation to private label mortgages, but those are all legacy deals from 10 years ago. They’re just stored in our books.”

Mr. Strzalkowski is playing the over-diligence of the Federal Reserve in his bond portfolio:

“The slope between twos and 10s I believe is, over the last year and a half, something like 100 basis points flatter. So we have had a short of the two-year Treasuries expressed via futures in all of our portfolios. And the thought was basically inflation isn’t there, the Fed is being hawkish for something that really hasn’t appeared yet, they’re being proactive, I guess you could call it, and it will be the front end of the yield that will react the most, and we have witnessed that.”

The current trend of rising interest rates will continue:

“The recent capital from abroad comes because we pay people in dollars, and in essence, they buy our Treasuries. So some of the buying will continue to be external via currency flow, the current account flows globally, but I expect that also for the dollar to weaken from a current strong position if those deficits continue, and rates are going to have to be higher at some point. I think it’s a gradual rise, but I think rates will gradually creep up higher over the next two to three years.”

To get the full macroeconomic analysis from Peter Strzalkowski, read the entire 3,464 word interview in the Wall Street Transcript.