For practically 20 years, Morgan Stanley portfolio supervisor Andrew Szczurowski has been honing his fixed-income investing technique. Lately, he is nonetheless discovering engaging investments available in the market, however admits some digging must be executed to separate the winners from the losers. As a portfolio supervisor on the Eaton Vance Strategic Earnings Fund , he seems to be for alternatives throughout a broad vary of belongings, together with these which were sometimes underrepresented. Eaton Vance was acquired by Morgan Stanley in 2021. Szczurowski known as the fund a “multi-sector, go wherever technique” that has underlying belongings with a weighted common of funding grade. Nevertheless, it could additionally take a bit extra threat, he stated. ETSIX 1Y mountain Eaton Vance Strategic Earnings Fund one-year efficiency His technique has paid off, with the fund incomes a 5 star ranking from Morningstar . Its A share class (ETSIX), obtainable to retail buyers, outperformed the class common return by 2.2 proportion factors annualized over a 10-year 12 months interval, in keeping with Morningstar. ETSIX has a 6.15% sponsored 30-day SEC yield, a web expense ratio of 1.46% and a web adjusted expense ratio of 1.02%. Its hefty charges land it within the second-highest quintile amongst friends, Morningstar stated. A barbell strategy The fund managers take a little bit of a barbell strategy to portfolio development, with top quality belongings on one aspect and riskier investments on the opposite, Szczurowski stated. The crew consists of two different portfolio managers, every with differing areas of experience. Szczurowski focuses on securitized merchandise since he’s additionally the co-head of Morgan Stanley Funding Administration’s mortgage and securitized funding crew. ETSIX’s highest allocation is in company mortgage-backed securities (MBS), about 34% of the portfolio as of Jan. 31. It additionally has publicity to rising market bonds, excessive yield bonds and floating-rate loans. Discovering winners The macroeconomic setting for fastened revenue continues to be “OK,” however it’s getting late within the cycle, Szczurowski stated. “There’s nonetheless loads of alternatives for lively fastened revenue buyers, however they’re simply not in your conventional Treasurys,” and funding grade corporates, he stated. “You must flip over a variety of rocks to search out these.” One among his favourite sectors is industrial MBS, which makes up about 4% of the fund. He “hated” the sector for a few decade and saved the allocation to beneath 1%. However the values of the buildings fell dramatically after the Covid pandemic, he stated. “These buildings have been bought, turned over, reappraised at what we consider now as cheap, engaging valuations and yields on these buildings,” Szczurowski stated. “There’s nonetheless land mines on the market, and we now have a crew of economic mortgage backed analysts which can be combing by way of these offers to search out the engaging ones.” He is sticking with CMBS that profit from the high-end client, who continues to be doing properly within the so-called Ok-shaped economic system marked by a divergence between higher-income and lower-income customers. Szczurowski likes Class A workplace buildings, both new or newly reworked with high-quality tenants. Additionally they have long-term leases, which insulates buyers from dangers comparable to AI disruption, which not too long ago took down some workplace shares . “We’re investing in a five-year bond, however the underlying people who find themselves leasing within the constructing a variety of instances have 10-, 20-year leases,” he stated. “We’re very comfy going into these.” The College of New Hampshire enterprise faculty alumni additionally finds high-end malls engaging, in addition to luxurious inns. On the funding grade aspect, he prefers company MBS over company bonds, since spreads within the latter are tight. When spreads are tight, buyers get much less compensation for taking up added credit score threat. He sees company MBS as “an acceptable parking place whereas we watch for one thing to develop out the chance spectrum on the company aspect.” Lastly, there are alternatives outdoors of the USA, particularly in rising markets, Szczurowski stated. Cash has been flowing in as buyers look to diversify away from the U.S. greenback, he stated. “You may’t paint rising markets all with one broad brush, however we do assume that there is a nice tailwind within the rising market house that we predict can proceed for a while as you’ve comparatively engaging yields and [it] gives some diversification,” he stated. One among his favourite trades is Egyptian bonds, noting the constructive reforms in its economic system. He additionally likes Kazakhstan, Nigeria and Turkey.