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Morningstar Conference to Cover Global Bonds, Smart Beta

Franklin Templeton's Michael Hasenstab, PIMCO's Bill Gross among top speakers

Some 1,914 investment industry folks, including 1,066 advisors, are headed to Chicago this week for Morningstar’s annual Investment Conference. The conference is one of the largest in the investment world, and this year the company is bringing together some of the brightest minds in the industry.

Michael Hasenstab, executive vice president and chief investment officer of global bonds at Franklin Templeton, is kicking things off with his keynote presentation Wednesday afternoon. Hasenstab will likely give his global outlook for bonds and where advisors can find opportunities in the bond markets. It’s been an interesting year for bonds; while many anticipated interest rates to rise and bond prices to fall dramatically, rates have stayed fairly low. Many fund managers expect rates to stay low for the time being.

Hasenstab is known for his contrarian plays. Lately, while investors have sought safety in U.S. government bonds, he believes the opportunities are in unloved areas around the world—Korea, Mexico, Poland and Ukraine.

Another bond guru, PIMCO’s Bill Gross, is slated to speak Thursday afternoon. Gross had a very public falling out with Mohamed El-Erian, former CEO and co-chief investment officer, who left PIMCO earlier this year. For years, Gross’s Total Return Bond Fund had been the largest bond fund in the country, but investors have withdrawn $59.6 billion from the fund in the last 13 months, according to Morningstar. The fund has returned 3.3 percent in the first five months of this year, but it still lags peers in the category.  

International investing is another hot topic during the conference. On Thursday, fund managers David Herro of The Oakmark Funds, Harry Hartford of Causeway Capital Management and Rob Lovelace of Capital Group will discuss international values and value traps. GMO’s Ben Inker, BlackRock’s Dennis Stattman and Morningstar’s Kevin McDevitt will provide their global purview in a panel session Thursday afternoon. 

Smart beta, or alternative beta, as some call it, is another topic to be discussed during the conference, with a breakout session on the topic featuring Portfolio Solutions’ Rick Ferri and Research Affiliates’ Chris Brightman. Smart beta strategies weight holdings in unconventional ways, such as fundamentally weighted indexes. These are based on fundamental criteria, as opposed to market capitalization. Many ETF and mutual fund providers have been getting on the smart beta bandwagon lately.

But even Ferri says these strategies have a dark side. Compared to investing in a low-cost total stock market index fund, smart beta funds can be higher cost, higher risk and experience extended periods of underperformance.

Other notable speakers include Cliff Asness of AQR Capital Management, a provider of liquid alternative mutual funds and hedge funds; Michael Falk of Focus Consulting Group; Fidelity’s Will Danoff; and Ariel Investments’ John Rogers.

Morningstar will also host a Tweetup on Wednesday from 6 to 7:30 p.m. central time to celebrate the opening of the conference. You can also follow the conference happenings using the Twitter hashtag #MICUS. 

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