Many (most?) people who use MFs for fixed-income investing do so in diversified vehicles that to a greater or lesser extent are also multi-sector. There are also some who are more contrarian, who rotate successfully/opportunistically from one fixed-income asset class to another, as good value arises from dislocations. Some do both.
This blog briefly notes the positives of both, in the context of how each approach could be impacted by measures the Fed Reserve is "considering" as part of a financial crisis action plan:
http://blog.alliancebernstein.com/index.php/2014/06/17/multisector-plan-can-help-avoid-the-crowd-in-credit/You see, according to the Fed
trial balloon leakthinking, under dire circumstances, retail investors in some transparent, open-end mutual funds might stampede for the exits in large sector-specific funds (the horror!); the degree to which this
spasmic disorder would threaten the banking system of the country is
so unpredictable, yet similar in impact to what one might expect to come from the
"shadow banking system," that one should create contigency plans for a run on these funds
as if they are part of the
"shadow banking system." At least that's the way I'm interpreting what I've read here and elsewhere about this
contrivance discussion:
http://www.ft.com/intl/cms/s/0/290ed010-f567-11e3-91a8-00144feabdc0.html?siteedition=intl#axzz34uHmImp0See what you think, esp. you
dangerous single-silo credit allocators.
Comments
http://davidstockmanscontracorner.com/a-horror-show-called-fed-gate-may-be-coming-to-your-bond-fund-soon/
[he's not on his rant box here; IOW, it's a safe read]
"Even the announcement of a rule-making would potentially trigger the very kind of sell-off that it would be designed to prevent. And if corporate bond prices took a tumble, it would not take long for equity markets to recognize that the massive flow of new debt capital which has been used to fund record stock buybacks could suddenly dry up."
If it was up to me to deal with this, I'd be thinking of a gradual time-structured series of "gates" restricting the overall percentage that bond funds could be forced to liquidate. Maybe the gradual imposition would prevent an immediate rush for the doors, and allow for a long-term readjustment back to a normal environment, after which the "gates" could be gradually deleted.
Murphy strikes again!