Boston-based MFS Investment Management is one of the few active management firms in hiring mode, as the trend to passive persists unabated.
MFS is staffing up in particular to support a multi-year build-out of its institutional fixed income platform.
“We’re investing in active fixed income at a time when the headlines aren’t great,” said Bill Adams, chief investment officer of fixed income at MFS, a subsidiary of insurance company Sun Life.
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“When we bring new investors [portfolio managers] into MFS they’re saying, ‘We really appreciate the commitment to active,’” Adams told Institutional Investor in an interview. “We’re getting really talented people because so many others are disinvesting in this business. But that is short-term perspective. Are there challenges for 2019? Yes, but we don’t run this business for one quarter or one year. If we can find the right people now, we think it’s the right outcome for shareholders.”
Adams explained that low interest rates around the world make an active approach to fixed income crucial, especially during the next downturn. Searching for yield, investors have moved into riskier areas of the bond markets. When credit becomes tighter, defaults will rise and investors will experience volatility and losses.
“Traditional fixed income plays an important role in a fully diversified portfolio and you need to manage it in line with the characteristics of the asset class,” said Adams. “When we go through a cyclical event, investors will learn that through fundamental research globally, we can build better solutions and generate alpha over and above passive.”
MFS isn’t entirely new to fixed income, but it has historically focused on global equity strategies.
With institutional investors increasingly interested in multi-asset products, the firm moved to develop as broad a platform in fixed income as it had in equities. In addition to customized strategies for institutions in the past few years, the firm has launched two new bond products this year. In April, MFS started an emerging markets debt product that combines corporate credit denominated in U.S. dollars and local currencies into one portfolio. In February, the Boston-based company launched a European credit strategy for non-U.S. retail clients.
MFS has been quietly seeding some fixed income strategies to develop their track records. “We wanted to institutionalize the platform, so we could withstand scrutiny. We couldn’t just assume fixed income flows would come,” Adams said.
Since January 2018, MFS has added 14 investment professionals in fixed income, including an ESG (environmental, social, and governance) analyst. Nine staffers recently joined in Boston and five in MFS’ London office. The firm is currently in the process of hiring two fixed income professionals for its Singapore office, which is its bond hub in Asia.
Another trader is to start shortly at the London office, MFS said, which will bring the team there to 14.