Growing up in Montreal, Adam Kramer was passionate about hockey, following the careers of his favorite Montreal Canadiens through their hockey cards.
âBeing able to find a player when he was a rookie and then follow the story and do the research was something that interested me,â he recalls. “Then finally, when I was a teenager and started buying stocks, I realized it was a very similar passion, following the stories, finding that undiscovered value and just following it.”
After joining Fidelity Investments in 1999 and becoming a portfolio manager focused on high income tactical funds, Mr. Kramer’s talent for researching these undiscovered stories paid off.
âIt’s really the reason to invest,â he says, recalling his research for minor league cards for players. “If you translate that to income-oriented asset classes, if you’re looking for high yield bonds and loans, you can find companies before they go public, for example.”
Mr. Kramer continues to apply these principles today as a portfolio manager in the High Income and Alternatives division at Fidelity, where he is responsible for more than $ 30 billion in assets.
In this role, he manages or co-manages several multi-asset income funds, opportunistic high yield bond strategies for institutional investors, as well as the Fidelity Tactical High Income Fund available to Canadian investors, which is a Lipper Award winner for 2021 in the Tactical Balanced category over five years.
The $ 1.1 billion fund returned 12.4% in the last year, as of October 31, with an annualized rate of 14.6% in the last three years and 9.2% in the last three years. past five years, after a 1% fee. .
For income-seeking investors, it “has a flexible mandate to invest in the full range of income-oriented asset classes,” says Kramer, from Treasury bonds to high yield bonds. variable rate debt, preferred stocks, convertible bonds and dividend paying stocks.
âIf you have the flexibility to invest in multiple asset classes, it really helps you preserve your capital in the event of a market downturn and capture the upside. “
Now based in Boston, where he continues to collect hockey cards with his youngest son, Mr. Kramer explains how investing in a wide variety of asset classes – far beyond traditional bond categories – can help meet income needs while balancing risk and return.
Why does this strategy work?
When you take a look at all of the major income-oriented US asset classes, they are all in turn the best-performing and worst-performing asset class in any given year. And that’s because the market tends to value good news and bad news, rightly or wrongly, only to adjust for the next year when real events occur.
What asset class are you excited about these days?
One of the things that we’ve had in the fund for the past year and a half has been real estate investment trusts, or REITs. I like them because you get a low to mid digit dividend yield. Unlike the rest of the market, which trades at a multiple of premium, REIT stocks trade at 20 to 25 year averages. It’s because there are still people who work from home, like me. That’s the bad news that’s included in the price.
A specific link to mention?
I pilot the ESG [environmental, social and governance] process in our high efficiency group, so I’m trying to get some good clean energy names in the portfolio. One company that has a clean energy aspect, which is actually a preferred stock and offers a very attractive return, is Babcock and Wilcox Enterprises. Its former activity was the parts and maintenance of fossil fuel power plants. There is a lot of bad news in the price because of this story. But it has moved on to energy recovery from waste, methane capture and carbon capture. It is the future of the company.
What combination of assets has led to your current success?
A large part of this is to exceed our exposure to treasury, but also to take advantage of opportunities in the convertible market. The convertible market has been a secret sauce in this fund because after episodic massive sell-offs in the markets, most of the opportunities that have been the most attractive arise in the convertible bond market.
Why is it important for managers like you to have such flexibility?
The key is the balance between income and the level of risk we take in the bond market. Each year, the major income-oriented asset classes, whether in the US or Canada, take turns as the best and worst performers as the market tends to misjudge risk. So we are trying to find these opportunities.
What is the result ?
By having this flexibility, you can both preserve capital – as it is a natural absorber of volatility if you invest in areas where there is too much bad news in the price – but if the bad news doesn’t. not take place the following year, you collect the coupon and you get upside down. This is really the essence of multi-asset income investing. So it’s basically about having more tools. This is the example of the search for hockey cards in minor leagues.
This interview has been edited and condensed.
For the full list of individual 2021 Lipper Awards winners click here and for group winners click here