Today's fund news from the Morningstar Investment Conference:
The presentations during day 2 of the Morningstar conference sounded strikingly similar to the ones a day earlier. Rob Arnott, chairman of Research Affiliates and manager of the PIMCO All Asset fund, warned attendees that sovereign debt around the world poses a major threat. In his speech, he said the odds of the United States falling into a double-dip recession are greater than 50 percent. Echoing Jeff Gundlach's address from Tuesday, Arnott warned that the current policies in the United States aren't sustainable in the long run. He said: "Why is Greece on the ropes and we're doing just fine? Because we have the largest economy on the planet, and we have the world's reserve currency. These buy us time. They don't exempt us." He warned that once things are set in motion, "you don't get much time."
John Derrick, director of research for U.S. Global Investors, says he's concerned that growth expectations are too high. Derrick said he's not sure how the U.S. government plans to fix the deficit problem. He told U.S. News: "Exactly how it all pans out is somewhat incomprehensible. I think that's the biggest risk. I think there's a lot of uncertainty at a macro level that is really hard to get your arms around, especially in a shorter time horizon, and that creates uncertainty and that leads to volatility in the market."
Derrick, along with an increasing number of managers, has begun to load up on gold as an insurance policy. "We've increased our allocation to gold in all of our portfolios," he says. "Even in domestic equity funds, they have healthy gold allocations around 10 percent or so." Derrick believes the government will soon begin to print more money to reflate the economy and that inflation will become a problem for investors in years to come.
The stock-pickers agree. Rob McIver co-manages the highly concentrated Jensen Portfolio. His team has selected 28 companies for their portfolio. In the current market climate, he says investors should be looking for high-quality companies with strong balance sheets. McIver told U.S. News: "This recession is not over yet. The road to recovery is full of potholes and we keep falling into them don't we? It pays to be conservative." McIver says his team prides themselves on their ability to protect their clients' money on the downside.