Team discusses its history, offers outlook on current environment
October 2, 2020
Baird Aggregate Bond Fund (BAGIX), Baird Core Plus Bond Fund (BCOIX) and Baird Intermediate Bond Fund (BIMIX) crossed the 20-year mark at the end of September, having been led by the same core team and having delivered exceptional investment results for investors.
“What is most gratifying for us is that our-time tested approach has worked for both clients who were with us from the start and the many newer clients who have joined us along the way,” said Mary Ellen Stanek, CFA, Managing Director, Chief Investment Officer and President of Baird Funds. “We could not be more proud of the hard work and dedication of our team who have consistently shown up to serve our clients day in and day out, across many different environments.”
Consistent Results Across Different Environments
The Baird Advisors team this year crossed $100 billion in assets under management. In addition to these three original funds, the team manages seven other bond funds, all using a risk-controlled approach. On the occasion of this 20-year milestone, several members of the portfolio management team addressed questions related to the Funds’ first 20 years:
Q. Your team has been remarkably stable through the period. What is the recipe behind the culture that has allowed Baird Advisors to stay together?
Mary Ellen Stanek: It starts with the fact that Baird Advisors was created with our clients’ best interests in mind. Our products are priced with an attractive fee schedule and our leadership team runs the show and is completely aligned with our investors. Both Baird and Baird Advisors have repeatedly been recognized as best employers, and Baird is employee owned so all of us are “invested” in doing well for our clients.
Warren Pierson: I would add that we do not have a big sales machine that has to be fed and supported by a higher cost structure. We have built something of value that has worked for our clients. We can celebrate our success collectively because it is our clients’ success as well.
Q. When these Funds were first launched in 2000, the 10-Year Treasury closed the year at about 6%. Today it is below 1%. You have consistently said that yields would stay lower longer than people expected. What drove that opinion and where do we go from here?
Mary Ellen Stanek: Inflation has remained benign and interest rates have marched to historic lows on the forces of demographics and aging populations around the world. Many thought that the Federal Reserve’s aggressive easing during the financial crisis would lead to inflation. But we recognized early on that while the Fed could make borrowing cheap, they cannot force borrowing. Aging populations are trying to save, not borrow.
Warren Pierson: Broader forces are shifting from a world where shareholder value was the primary force and companies kept wages down through the introduction of technology. That focus may be shifting more toward the benefit of all stakeholders, not just shareholders. The advent of COVID has had an impact too, and there remains significant slack in the economy. So it is hard for us to see how inflation will rise significantly any time soon.
Q. The last 20 years include some historic moments like the September 11 attack on the World Trade Center, a near financial meltdown in 2008 and most recently a global pandemic and global economic shutdown. Is there one thing you can point to that has allowed these funds to weather tough times?
Jay Schwister: At every critical point over the last 20 years, our process and our philosophy as a bottom up manager was important. We are not top down managers who seek to get way out ahead of the next big move. Instead, we seek every opportunity we can to compound consistency. We believe this is why investors own bonds, especially in a low rate environment. They hire us to dampen volatility and normalize overall portfolio returns, not to create excitement.
Q. The Funds’ consistent results have led to steady growth in assets and in your team. How have you managed this growth with investors’ interest in mind?
Charlie Groeschell: One of our key focuses is constantly trying to get better. We continue to invest in young talent and cultivate that talent by giving them experience. The rookies on the team bring enthusiasm and different perspectives. By putting them right next to our more experienced people, we try to help them be as good as they can possibly be. Their participation is a key element in our success. We also create an environment where everyone on the team can lead a balanced life that is sustainable for the long term.
Q. No one expected a pandemic would disrupt our lives and our economy in 2020. Has the pandemic changed the way you work together or how you view the markets?
Mary Ellen Stanek: The pandemic has reinforced how important collaboration and teamwork is. In fact, we believe it is what sets us apart. During the peak of the turmoil, our team did what it always does which was to prioritize our clients and their needs.
While we had prepared a business continuity plan, none of us expected the need to protect ourselves from a pandemic. We split the team, separating them on different floors, and did our best to reduce our risk and protect our people while still being available for our clients. Our job is all about risk control, and our team recognizes the importance of being careful both inside and outside of work.
Q. The pandemic and an election make it difficult to gaze into a crystal ball. But can you share what you believe the key drivers of the economy and bond markets for the rest of the year and into 2021?
Warren Pierson: We believe you have to pay close attention to the Fed given its unprecedented control and influence. The Fed stated they will keep short rates pegged to zero, and we expect them to use quantitative easing to keep interest rates fairly stable across the curve and yield spreads fairly tight. But as always there are a number of unknowns. The election and other factors could disrupt this stable and benign outlook. For example, you might see growth surprise on the upside if an effective vaccine is introduced.
About Baird Advisors
Baird Advisors is Baird’s fixed income asset management division and advisor to the Baird Bond Funds. As of September 30, 2020, the group manages more than $104.7 billion in taxable and tax-exempt fixed income portfolios including Baird Ultra Short Bond Fund, Baird Short-Term Bond Fund, Baird Intermediate Bond Fund, Baird Aggregate Bond Fund, Baird Core Plus Bond Fund, Baird Short-Term Municipal Bond Fund, Baird Core Intermediate Municipal Bond Fund, Baird Quality Intermediate Municipal Bond Fund, Baird Intermediate Municipal Bond Fund and Baird Municipal Bond Fund. For more information, visit www.bairdfunds.com.
Putting clients first since 1919, Baird is an employee-owned, international wealth management, asset management, investment banking/capital markets, and private equity firm with offices in the United States, Europe and Asia. Baird has approximately 4,600 associates serving the needs of individual, corporate, institutional and municipal clients and more than $305 billion in client assets as of December 31, 2019. Committed to being a great workplace, Baird ranked No. 13 on the 2020 FORTUNE 100 Best Companies to Work For® list. Baird is the marketing name of Baird Financial Group. Baird’s principal operating subsidiaries are Robert W. Baird & Co. Incorporated in the United States and Robert W. Baird Group Ltd. in Europe. Baird also has an operating subsidiary in Asia supporting Baird’s investment banking and private equity operations. For more information, please visit Baird’s website at www.rwbaird.com.
Fixed income is generally considered to be a more conservative investment than stocks, but bonds and other fixed income investments still carry a variety of risk such as interest rate risk, regulatory risk, reinvestment risk, credit risk, inflation risk, call risk, default risk, political risk, tax policy risk and liquidity risk. In a rising interest rate environment, the value of fixed-income securities generally decline and conversely, in a falling interest rate environment, the value of fixed income securities generally increase. Municipal securities investments are not appropriate for all investors, especially those taxed at lower rates.
Investors should consider the investment objectives, risks, charges and expenses of each fund carefully before investing. This and other information is found in the prospectus and summary prospectus. For a prospectus or summary prospectus, contact Baird directly at 866-442-2473. Please read the prospectus or summary prospectus carefully before investing.
Performance data represents past performance and does not guarantee future results. The investment return and principal value of the investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance data may be lower or higher than the data quoted. For performance data to the most recent month end, Annual Average Total Return, gross and net expense ratios and any sales charges for both the investor and institutional classes of the funds, please visit https://www.bairdassetmanagement.com/baird-funds/funds-and-performance