The woman widely viewed as the likely successor to legendary bond fund manager Daniel Fuss has joined a new firm that will put her in direct competition with her old colleague.
Kathleen Gaffney, who co-managed the $22 billion Loomis Sayles Bond Fund with Mr. Fuss for the past 15 years, was named co-director of investment-grade fixed income at crosstown rival Eaton Vance Corp. last Tuesday.
In Ms. Gaffney's new position, she is responsible for crafting new multisector bond funds for Eaton Vance, the firm said. The funds will have the freedom to invest globally across government, investment-grade credit, high-yield and emerging-markets debt, similar to the funds she co-managed at Loomis Sayles.
Ms. Gaffney's track record co-managing multisector funds is among the best in the industry. During her tenure as co-manager of the Loomis Sayles Bond Fund (LSBRX), it had an annualized return of more than 8%, more than 2 percentage points better than that of the Barclays Aggregate Bond Index.
It is unclear, though, just how much of the fund's performance could be attributed to either Ms. Gaffney or Mr. Fuss, or even the two managers who were added to the fund in 2007.
"DEEP RESOURCES'
Jae Park, chief investment officer at Loomis Sayles & Co. LLC, said he doesn't expect the fund to be negatively affected by Ms. Gaffney's departure, as the rest of the management team and its research staff aren't going anywhere.
“We've been working to build a team process with deep resources for a very long time,” he said.
For some advisers, however, the loss of Ms. Gaffney raises questions.
Melissa Joy, director of investments at the Center for Financial Planning Inc., has about $19 million of client assets invested in Loomis Sayles bond funds that Ms. Gaffney co-managed.
“Part of our conviction with Loomis Sayles bond strategies was Kathleen Gaffney's long tenure with Dan Fuss,” she said. “Over the years, we spent as much time focusing on Gaffney as we did on Fuss when we evaluated the strategies.”
EYE ON GAFFNEY
Now that Ms. Gaffney has left, Ms. Joy said, her firm will be reviewing the fund's management team.
“We made the decision to not take an immediate action, but we need to redo our homework,” Ms. Joy said.
She will also be keeping a keen eye on Ms. Gaffney's new venture.
“We're curious to see what she has up her sleeve,” Ms. Joy said.
Once the planned Eaton Vance multisector funds get off the ground, presumably sometime next year, it will be interesting to see the extent to which Ms. Gaffney's investment ideas coincide with Mr. Fuss'.
Payson Swaffield, chief investment officer at Eaton Vance, expects that there will be some differences.
BIG BOON
Either way, the new hire is likely to be a big boon for Eaton Vance, which has $22 billion in fixed-income mutual funds, according to Lipper Inc. For comparison, Ms. Gaffney was managing about $74 billion in fixed-income assets at Loomis Sayles.
Multisector bond funds also have been a hit with investors as they look for a more tactical approach among the credit and interest rate potholes that litter the fixed-income landscape. Such funds gained $13.5 billion in net inflows through the end of last month, making them the sixth-best-selling category, according to Lipper.
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