BAB UITs

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Jan 29, 2010 10:28 am

First Trust and Van Kampen offer BAB UITS. Being that it's IRA season and seeing as how these funds offer close to a 6% yield, offering up one of these instead of the usual Franklin/Fidelity/American/Vanguard fund might be an idea.

 
Let's see, did the S&P 500 return 6% a year over the last ten years? Oh, that's right it did not! In fact, it didn't return 6% over the last ten years.
 
Ok, not predicting the future and we can't guaranty a 6% yearly total return for these UITs, but investing in other arenas can't hurt.
Jan 29, 2010 12:28 pm

Yup, already been looking at them with FT.


BG, since you do a lot of bonds, where do you stand with regards to interest rates going up and affecting your bond values?  I've been hearing from a few bond managers that their biggest fear is duration of the portfolios.
 
Are you addressing this with your clients?
Jan 29, 2010 12:36 pm

I thought BG didn't give a damn about interest rate movements.

Jan 29, 2010 1:01 pm

Its a UIT

Jan 29, 2010 4:21 pm

They also now have medium term BAB UITS 5.32% long term yield, 17 yr avg maturity and 5 yr call proection or Make Whole. May fit in a ladder.

Jan 29, 2010 5:51 pm
snaggletooth:

Yup, already been looking at them with FT.


BG, since you do a lot of bonds, where do you stand with regards to interest rates going up and affecting your bond values?  I've been hearing from a few bond managers that their biggest fear is duration of the portfolios.
 
Are you addressing this with your clients?
 
Yes, I'm addressing it with clients. I tell them i can't predict interest rates. I add that interest rates are cyclical. That they are buying a long term investment and that over the life of that investment it may be worth more or less than what they paid as interest rates do what interest rates do, cycle up and down. However, come maturity day, they get their money back. Until then they get 6% or whatever the coupon is. If 6% income isn't good enough, I can't help them. They need to go to Pimco and buy one of their  low duration total return bond funds.
 
I buy bonds for income, not total return or as part of an asset allocation program. What you see is what you get. If you sign up for a 6% coupon, you get a 6% coupon. It's straight forward and simple. Nothing has to happen or fall in place. You want 6% income, you got it!