“We have a number of contrarian positions that maybe haven’t worked over the past week or two, but they’ve worked well year to date, so we always examine the fundamentals and if the fundamentals have changed then maybe we’ll change,” Mather said.
Gross’s Puts
Gross’s strategy of selling volatility, or underwriting the risk of wide price swings, may have hurt his fund’s performance. The manager and a Janus spokeswoman didn’t immediately respond to requests for an interview.
Gross has sold put options on U.S. Treasury yields, on the Markit CDX North American Investment Grade Index, on the Standard & Poor’s 500 Index, and on Mexican and Brazilian sovereign debt using credit-default swaps. As of June 30, one put option on U.S. Treasuries accounted for almost 7 percent of the fund.
Each of these positions probably cost him as markets blew through his targets.
Beginning in February, Gross has used an options strategy known as a strangle, betting on a largely range-bound market in U.S. government bonds, usually wagering at most three months out. He’s adjusted the bet’s upper and lower bounds as the market has moved, and as of July 8 has targeted within 2.1 percent and 2.5 percent for the benchmark 10-year note.
The trade was “basically a form of selling insurance” against volatility, Gross said in an April 9 interview. “And like any insurance company, you just have to sell it at the right price. If you sell at the wrong price and you have an earthquake or a flood, then you lose money.”
Fuss’s Currency Wagers
Fuss has a strong long-term record as a bond manager, helped, in part, by his willingness to own bonds priced in currencies other than the U.S. dollar. This year that strategy has backfired as the Canadian dollar and the New Zealand dollar have lost ground to the U.S. dollar.
Loomis Sayles Bond, which beat 94 percent of peers over five years, trails 98 percent this year, according to Bloomberg data.