Fixed income hedge funds are likely to have the worst quarter in their history in the three months to March 31, hit by a lack of market liquidity, Dan Fuss, a veteran fund manager known as the Warren Buffett of bonds, said on Thursday.
Fuss, vice chairman and portfolio manager of Loomis Sayles, which oversaw $229.1 billion as of Dec. 31, said regulations introduced after the financial crisis had damaged liquidity in many parts of the bonds markets, making it difficult for hedge funds to keep up their "shadow banking" activities.
"It's probably going to be the worst quarter in history for a number of fixed income-oriented hedge funds. A few are already known but there are some to be wiped out," Fuss said during a visit to Tokyo.
Fuss, who has spent more than half a century managing bond portfolios, runs the flagship Loomis Sayles Bond Fund, which has $15.4 billion under management.
Fuss also said the U.S. Federal Reserve is likely to wait to raise interest rates at least until December after the U.S. presidential election.
"(It's) common sense (that) they want to do just nothing - and they prefer to do nothing until the election is over."
The Federal Reserve held benchmark rates steady on Wednesday and its fresh projections showed policymakers expected two quarter-point increases by the end of the year, half the number expected in December.