PORTFOLIO SPOTLIGHT
Manager Janet Rilling Age 55
Fire Hose Filter
The Allspring Core Plus Bond Fund recently held roughly 715 positions . That ’ s a lot , though it ’ s just a fraction of the number of constituents held by the Agg index . The portfolio ’ s size and market breadth mean that , when it comes to assessing investment opportunities , Allspring ’ s fixedincome analysts are like someone trying to drink from a fire hose .
“ There ’ s a deluge of information coming at us every day ,” Schueller says . “ We ’ ve adopted a six-month approach in order to limit the sheer volume of data we need to consider .”
He ’ s referring to Allspring ’ s process of focusing its investment horizon on a rolling six-month time frame . The managers and the firm ’ s fixed-income analysts meet at year ’ s end and midyear to produce sector-level return forecasts for the next six months , taking into account factors such as monetary policy changes , the outlook for corporate fundamentals , the direction of rates , and predictions about whether credit spreads will widen or narrow .
Rilling describes her fund ’ s investment approach as a mix of quantitative and qualitative . “ We ’ re always looking at relative valuations , so understanding valuations requires quantitative elements . We also do a lot of work at the sector level that looks at historic relationships between sectors .”
Among the quant tools they employ is the Black-Litterman model , an advanced asset allocation tool that lets Allspring ’ s analysts incorporate their qualitative views into the portfolio construction process .
“ There ’ s always a judgment and an interpretation of the numbers that we use ,” Rilling says .
Allspring ’ s fixed-income analyst team comprises nearly 50 individuals who do sector-level security research . That includes the portfolio managers . Rilling , for example , specializes in investmentgrade credit , while Schueller ’ s forte is high-yield credit .
In between their six-month outlooks , the fund managers fine-tune their sector holdings and , if needed , adjust portfolio targets for bond duration , yield curve or other attributes . “ As a group we ’ re very collaborative when we make a decision to change a target ,” Rilling says .
Golden Moment ? One of Allspring ’ s mantras is what it calls riding the curve in fixed income . In
Professional Background She is a senior portfolio manager and head of the Plus Fixed Income team at Allspring Global Investments . She joined Allspring from its predecessor firm , Wells Fargo Asset Management . She joined Wells Fargo from Strong Capital Management . She began her investment industry career in 1990 as an auditor with Coopers & Lybrand , specializing in the manufacturing and financial services industries .
Outside Interests Spending time with family , running and yoga .
Manager Michael Schueller Age 56
Professional Background He is a senior portfolio manager for the Plus Fixed Income team at Allspring Global Investments . He joined Allspring from Wells Fargo Asset Management . Before that he was a senior investment research analyst at Strong Capital Management . He previously was a practicing attorney specializing in corporate reorganizations , mergers , and acquisitions .
Outside Interests Cycling , reading and golf . other words , investors with cash on the sidelines shouldn ’ t wait for the all-clear signal — in the form of the Fed lowering interest rates — before adding duration to their fixed-income portfolios .
Duration is a measure of a debt instrument ’ s sensitivity to interest rate changes . Long-dated bonds have higher durations , meaning they ’ re more sensitive to rate changes because of their longer time horizons . When rates go up , the price of existing bonds generally go down . When rates go down , prices usually go up .
Some investors were burned last year on their long-term bond bets when they tried to front-run the Fed on rate cuts . Allspring calls for a measured approach that allocates across the yield curve in the current transitory period before the Fed starts cutting rates .
The company notes that yields have recently been at or near 15-year highs across the yield curve , and that longer-maturity yields are more in line with those on the front end of the curve . The firm believes this provides an attractive entry point for longer-duration exposures that could benefit if yields fall from these high levels .
Its research found that during the past four transitory periods in monetary policy dating back to the mid-1990s , investors with a diversified duration portfolio did much better than those who missed the opportunity by waiting for the golden moment to shift their duration positioning .
Because the Allspring Core Plus Bond Fund is meant to be a foundational fixedincome strategy for investors , its duration moves are limited to one-year long or short the Agg benchmark ’ s duration of about six years . Still , the portfolio managers shift durations up or down when appropriate and structure the portfolio to have duration exposure across the curve . In addition , the team runs a suite of strategies with varying duration profiles that an investor could use to ride the curve and position for different economic outcomes .
“ We ’ re somewhat tactical about how we manage duration ,” Rilling says . “ We just don ’ t put a position on and hold it . We want to be sensitive to where rates are .”
ADVISOR PHOTOGRAPHS COURTESY OF ALLSPRING MARCH 2024 | FINANCIAL ADVISOR MAGAZINE | 47