October 5, 2010

A Bond Bubble? FundQuest CIO Clift Begs to Differ

There is no bubble, but expect continued unemployment

There has been much talk of there being a bond bubble, but Tim Clift, chief investment officer for FundQuest, the U.S. asset and wealth management arm of French bank BNP Paribas, says bluntly that there is no bubble. “No one is in Treasuries to make a bundle,” said Clift in a Sept. 30 interview in New York, “it’s not speculative at all.”

In a wide-ranging interview that touched on the economy, the elections, and unemployment, and on what advisors and their partners are looking for from companies like FundQuest, Clift noted that “bubbles happen when there’s a lot of greed,” and that investors are instead parking their money in cash instruments due to uncertainty over not just the markets, but the overall economy and politics.

Asked what might give investors the impetus to get back into equities, Clift said that first, “we have to get over the [mid-term] elections” to help remove some uncertainty from investors’ minds. He suggested that the unemployment numbers due out Oct. 8 will be set upon by both parties as confirmation of their own policies and condemnation of the other party’s shortcomings. However, Clift did suggest that we should all get used to the low growth, relatively high unemployment that marks the current economy. “Nine to 10% unemployment is the new normal,” he argued, saying that he expected unemployment to hover around the current mid-nine percent figure “for years.”

Reflecting advisors’ increased due diligence on their money management, custodial and broker-dealer partners, Clift further said that FundQuest was making a “big push on operational due diligence” when it comes to considering new money managers for the FundQuest platform. Emanating, he said, from “BNP’s strong risk-averse culture,” that operational due diligence team operates independently of the investment team when evaluating a new money manager, noting that the operational team can, and has, “vetoed the investment team’s recommendations” when picking a new manager.

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