When it comes to managing an unconstrained bond fund, it’s better to be indifferent about the Federal Reserve’s rate hike plans, said Brad Friedlander, portfolio manager for the Angel Oak Multi-Strategy Income Fund (ANGIX). ‘We focus mostly on floating rate assets, that’s the key in the world of fixed income right now,’ said Friedlander. ‘I don’t want to be lulled or trapped into the idea of extending maturities out right now. Of all times, now is not the time to be sucked into that.’ The Angel Oak Multi-Strategy Income Fund is up 3% so far this year, according to fund-tracker Morningstar. The trailing twelve month yield for the five-star rated, $4.6 billion fund is 5.7%. Slightly over 40% of Friedlander’s fund is in non-Agency residential mortgage-backed securities. He said momentum in the housing market – as further evidenced by a Street-beating earnings report today from homebuilder Lennar (LEN) – is a prime reason for owning these bonds. ‘Delinquencies are down considerably. Home prices are up,’ said Friedlander. ‘I think this is going to be a prolonged housing cycle. We want to be behind that and with that.’ Friedlander added that he prefers non-Agency mortgage-backed bonds to those issued by Fannie Mae and Freddie Mac, not just for the yield pickup, but due to the lack of prepayment risk.
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