Don Quigley describes his Julius Baer Total Return Bond Fund (BJBGX) as a “core-plus” fund, with the core being its U.S. bonds, while the “plus” is the fund’s international corporate and sovereign debt. The fund’s A-share class has had an average annual return of 8.24% for the past five years, and has returned 6.27% since its inception in 1992. Quigley, who joined Julius Baer early in 2001 and who mentioned in passing that “investment advisors are much more sophisticated than they get credit for,” has a quick, self-deprecating wit, a not altogether common trait for money managers. He spoke to Editor Jamie Green in early December.
Julius Baer has some interesting funds. The one you’re probably most familiar with is the International Equity Fund–Riad Younes and Richard Pell have done a great job there. Richard’s the co-manager on that fund and on my fund; he’s the CIO of JBIM [New York-based Julius Baer Investment Management].
How do you and Mr. Pell divide your responsibilities? As CIO, he has veto power over any trade or position, but on a day-to-day basis, I’m the guy. Richard grew up in bonds, so I can have a 10-minute conversation with him and he knows everything I’m thinking; we speak the same language.
He’s constantly and directly talking to everybody at JBIM. I won’t be talking to the high-yield team as often; he knows what they’re doing, and he might say, “This might be apropos for you.” He does a great job of tieing [the teams' information] together.
What about the fund? It’s a core-plus fund. A lot of our bigger competitors have total return bond funds, but what makes us different is that we’re very much macroeconomic driven–we have much more of a top-down bent than our competitors. Where they might be adding a plus to their core holdings, they mean high-yield, while our plus is how we break down the world, and execute on our view of the world. We have [bonds from] the major economies–the U.K., Eurozone, Japan. Then satellite–Canada for the U.S., and Switzerland, Sweden as satellites for the Eurozone. Then we go to convergence plays–that would be Eastern Europe now. Then there’s low correlation, which the advisor community can appreciate–such as Mexico and especially Iceland, which doesn’t seem to be correlated with anything except sunspots. The last segment is commodity countries–Norway, South Africa, Russia, and Chile. We don’t want too much of a commodity play–this is a bond fund, not a commodity-driven thing.
You buy corporates and sovereigns? When we go into a non-dollar bond, we will only buy sovereigns or just below sovereigns–like in Australia, there are tax reasons not to buy the Australian government bond, so then we’d buy a province’s bond. There’s no printing press behind it, but it’s a government security, just like the province of Ontario. In other words, we try to not take credit risk. The credit risk in Australia, for instance, is de minimis.