True to the core: An interview with Tom O’Connor
With volatility predicted for 2015, consider an anchor for your bond portfolio. Tom O’Connor, CFA, has been a portfolio manager for the Wells Fargo Advantage Core Bond Fund since 2003.
What is your investment philosophy?
Our investment philosophy has four major tenets:
How do you know if this has been successful?
We consider the proof of our success to be the information ratio. The information ratio is a portfolio statistic calculated by dividing a fund’s excess return by the standard deviation of excess return. What it measures is how much return you generate versus how much risk you take—or more simply, a manager’s skill versus luck. We have been pleased with the Core Bond Fund’s information ratio.
What can you tell us about your investment team?
The team has an average of two decades of investment experience. We have been working together for more than a decade. The team has been tested by some very challenging markets, the 2008 financial crisis in particular. This was a real litmus test of the stability of our team and the consistency of our investment process. The fund had a positive return in 2008, a year when a lot of fixed-income managers delivered surprises to their investors. Staying true to our philosophy during this challenging time was rewarded, to the benefit of our shareholders.
Some strategists are predicting a volatile 2015. What does volatility mean for investors?
Volatility may be stressful for individual investors, but high volatility with the right blend of liquidity is very good for our process. Sometimes challenges for others can potentially create opportunities for those of us with conservative positions and an active process. This could be due to fundamental or technical elements in the market.
There are a lot of wildcards in the outlook for 2015, including the price of oil, the performance of global economies, and Federal Reserve policy. We believe that we are well positioned with our active approach and disciplined focus on risk, and we stand ready to take advantage of bottom-up relative-value opportunities as they arise.