“We're looking to take advantage of the inefficiency” to buy split-rated bonds that will eventually get upgraded to full investment-grade status, he said. The ICON fund, which has outperformed its benchmark over the longer-term periods, held split-rated bonds including those issued by Micron Technology Inc., Standard Industries Inc. and MPT Operating Partnership LP.
Thornburg’s Erickson says there’s still the risk some fund managers might not be as transparent.
“It’s one of those things, that’s not quite a technicality, and investors want to understand how the statements made in a prospectus are impacting the portfolio,” said Thornburg’s Erickson. “There’s certainly room to play games if they don’t clearly state how they handle split-rated issues.”
This article was provided by Bloomberg News.