One of the worst-ever bouts of dislocation in the U.S. bond market generated some winning trades for Vanguard Group’s Inc.’s Gemma Wright-Casparius.
As liquidity disappeared amid the pandemic-sparked mayhem in March, the veteran fixed-income portfolio manager saw opportunities, including in older, less-traded Treasuries. The market for these securities had all but vanished after a popular trade that exploits price differences between cash Treasuries and futures blew up.
For Wright-Casparius, the sole head of four actively managed mutual funds with combined assets of about $50 billion, the undervalued securities presented a bargain. As she and a handful of senior colleagues continued to work on the firm’s trading desk in Malvern, Pennsylvania, Wright-Casparius also deemed that inflation expectations had become too dire and increased mortgage-debt holdings. Things soon got so desperate for the bond market that the Federal Reserve stepped in to support it.
Her wagers have paid off, with several of her funds beating most of their peers in 2020. Now, the portfolio manager, who’s been in finance for about 40 years, envisions a long road to economic revival as the nation endures the steepest levels of joblessness since the Great Depression.
“The market gave you some lemons early in March, and we tried to capitalize on that,” Wright-Casparius said in an interview. Going forward, “there’s still a lot of unanswered questions, especially regarding consumer behavior, so the economic recovery should be slow and gradual.”
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The $7.2 billion Vanguard Intermediate-Term Treasury Fund, among the four she runs on her own, has returned 7.2% this year -- beating 89% of its peers, according to data compiled by Bloomberg. Her $9.2 billion Short-Term Treasury Fund is outpacing 90% of rivals.
It is part of a select universe of just 31 U.S. fixed-income mutual funds and exchange-traded funds tracked by Morningstar Inc. that were run exclusively by women as of May 1. That tally, helmed by 27 women, is out of more than 2,500 fixed-income funds, with over 2,200 managers, followed by Morningstar. For taxable funds alone, the list shrinks to 16 women.
For women in asset management, progress has been slow, despite widespread focus on the importance of diversity. Even passive funds, a booming area of money management that was once a hot-spot for female talent, have seen the percentage of women managers drop over the past decade.
Still, Wright-Casparius is positive on the prospects for women and is as excited about what she does as when she began her career. Before switching over to asset management, she worked at investment banks including Barclays Plc, where she was director of fixed-income research. She joined Vanguard in 2011.
The two largest holdings in Wright-Casparius’s Intermediate-Term fund as of March 31 were a 0.63% coupon inflation-linked Treasury and a 2.88% coupon regular Treasury, both of which were originally issued in 2018 and mature in 2023, data compiled by Bloomberg show. The fund purchased the former last quarter and added to the latter position during the period, according to the data.