The $21 billion Loomis Sayles Bond Fund is holding the highest levels of reserves since 2007, according to Kathleen Gaffney, co-manager along with Dan Fuss. The fund, which according to Bloomberg data has advanced 8.4 percent over the past five years to beat 96 percent of peers, has about 9 percent of assets in cash and equivalents and nothing in Treasuries.
"We normally park our reserves in Treasuries but the Treasury market is too volatile these days," Gaffney said in a telephone interview from Boston.
Rick Rieder, who oversees $595 billion as chief investment officer of fundamental fixed-income at BlackRock Inc. in New York, said he is holding "high levels of cash" in various bond portfolios. The fixed-income portion of BlackRock's Strategic Income Opportunities Fund has 43 percent of its assets in cash and cash equivalents.
Rieder said his firm is "underweight" Treasuries relative to benchmark indexes, although he may be a buyer if yields on the 10-year Treasury rise above 3.5 percent.
"We're a bit defensive because the downside risks are significant, but we also think there's going to be opportunities to take advantage of as we learn more about the debt ceiling situation and the European debt crisis," Rieder said in a telephone interview.