A chat with TDAM's newest fixed income gatekeeper
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In the investment world, equities are often seen as the fun and exciting cousin everyone wants to be around. Bonds, not so much. Bonds are regularly viewed as more of the conservative younger sibling that is a bit boring but always has to follow wherever you go. Fortunately, there are many who truly appreciate how important and special the boring younger sibling really are.
To highlight the importance of bonds, we recently chatted with Michael Augustine, who recently took over as Head of Fixed Income and Asset Liability Management (ALM) at TD Asset Management Inc. (TDAM). Michael leads the teams responsible for providing a full complex of fixed income solutions for retail and institutional clients, as well as the firm's ALM platform providing multi-asset class client solutions.
You've recently become Head of Fixed Income here at TDAM. Could you tell us a little bit about yourself and your background?
MA: I've been in the business for over 30 years, and during that time, have seen the business from many different perspectives. Funny enough, academically, I was trained as an actuary, so I'm fully qualified! At the same time, I'm also a Chartered Financial Analyst (CFA) charter holder and have spent most of my career as a portfolio manager but also spent some time on the academic side.
If I think about my TDAM story that began almost 11 years ago when I joined the firm as an active fixed income portfolio manager, I really had two mandates. The first one was to be an active fixed income portfolio manager for institutional mandates. The second was to grow the firm's ALM capabilities. Over that time these responsibilities grew. In this new role, or maybe I'd refer to it more as an expanded role, what I'm really looking forward to is to continue to work with that same team - the team that I've been working with for over a decade.
Can you talk a little bit about what innovation looks like in fixed income investing and how we do things here that might be unique when compared to other asset managers?
MA: While we have been managing active fixed income at TDAM utilizing the same three guiding principles since 1994, we have grown and evolved as a firm. The group of internal partners we can now draw on as we construct and position portfolios, has greatly expanded. So, whether it's our ability to collaborate with the asset allocation team on macroeconomic views, leverage private market research and investments or incorporating more global exposures – we are uniquely positioned with a breadth and depth of investment experience that is truly unique amongst asset managers.
Can we talk a little bit about investing for retirement or how our fixed income fits within our asset allocation investments?
MA: Interest rates repriced last year and as a result, bonds are looking quite different than they have for some time. I think in some ways it's sort of "back to the future". Fixed income can once again resume its role of adding incremental income and providing capital preservation within a multi-asset class portfolio. If we look at our last asset allocation positioning, we are maximum overweight fixed income. So, we see a key role within asset allocation accounts for those with a retirement focus.
We are max overweight fixed income recognizing the risk reward tradeoff and within our fixed income strategies. Can you talk a little bit about where we are with respect to our view on credit?
MA: Credit's interesting. We are now in late cycle, and normally what we would be doing is increasing the quality of credit that would set us up to take advantage should there be more recessionary conditions later in the year to redeploy into securities where we're better compensated for risk. Eight weeks into the year it started off gangbusters, risk on we saw a credit spread compression that as active managers, we looked at and questioned, are we still getting paid for it? And recently we made a minor modification to bring down the credit allocation from modest overweight to neutral. So that really expresses where we think we are right now.
On a personal note, what are you watching these days?
MA: If I think about what I'm looking forward to watching, you know, I grew up in the seventies, Star Wars generation, so the New Mandalorian on Netflix is what I'd like to watch. However, I have three kids under eight, so what I'll probably be watching is anything they want to watch. As of now its Shrek's follow up movie "Puss in Boots."
For more insights from Michael, check out our most recent TDAM Talks Podcast hosted by Ingrid Macintosh, VP, TD Wealth and Head of Sales Enablement, Content Marketing & Communications, Data Analytics & Digital Strategy, TDAM. On the podcast, Ingrid's guests also included Elaine Lindhorst, Vice President & Director, Senior Portfolio Manager, TDAM.
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