TCW promotes US fixed income down under

US based asset managers and fixed income specialists TCW have completed a goodwill tour of Australia to promote US fixed income investing as an asset class, but have conceded Australian investors may be just as well off in a term deposit.

TCW is hoping to break into what it calls the “oligopoly” of PIMCO, Western Asset (Legg Mason) and BlackRock, according to Tad Rivelle, TCW group managing director and chief investment officer - high grade fixed income.

TCW provides a point of difference through being more nimble than these larger managers, Rivelle said.

“When you’re a trillion dollar firm you lack the ability to scale a whole variety of different strategies,” he said.

A firm that size has to express scalable macro strategies in their portfolios and may have an inability to get granular and focus on a specific segment of the corporate bond market for example, he said.

One particular market that is particularly attractive is secured lending to US airlines, Rivelle said.

The airplanes are actually owned by bankrupt remote vehicles since nobody wants to take the counterparty risk where US airlines are involved. These bankrupt remote vehicles collect lease payments via enhanced equipment trust certificates and distribute payments to bond holders, and this type of strategy has been one of the best performers in US fixed income, he said.

TCW has completed a number of scheduled meetings with Australian investors, and was hoping its offering would appeal to both institutional and retail investment managers, as well as getting Australian managers to think about US fixed income, according to TCW’s executive vice president Mark Gibello.

But comparing the appeal in US fixed income for an Australian investor who could get a rate of 6.7 per cent in a term deposit, Rivelle conceded the term deposit had strong claims, but said fixed income could be used to provide diversity and that a term deposit was not always an option for every investor.

“The proposition for a fixed income investor, the way we would put it is that if you can get a big per cent real rate of return that’s risk-less, take it. Maybe you can diversify some of it, you don’t have to have 100 per cent, but it’s sort of a no-brainer,” he said.

TCW is an indirect majority-owned subsidiary of Societe Generale, with approximately two-thirds of its $110 billion in assets under management allocated to fixed income. Around one-fifth is invested on behalf of non-US investors. TCW is affiliated with Amundi, which was formed following a merger between Credit Agricole and Societe Generale.