By Courtney Darby
There is no "I" in team, or in the Westcore Plus Bond Fund. The fund's team-oriented approach to management and mantra that "it's the investors' money" has earned it several Lipper Leader awards. Most notably, Westcore Plus Bond Fund was named a leader in consistent and total returns for providing superior consistency, and above-average risk-adjusted returns when compared to a similar group of funds.
"Many people talk about a team philosophy, but we live it day to day. It's not my piece of a portfolio or someone else's piece of a portfolio; it is a viewpoint that this is all of us together," co-portfolio manager Jerome Powers says. "We know it's the investors' money, and we really want to focus on that aspect. We also put our money with the investors in these funds and participate right alongside them."
Co-portfolio managers Powers, Mark McKissick and William Stafford say their fund has been able to deliver solid, consistent returns over the past 16 years since the fund was launched because they focus on the long term, adding value to the portfolio through bottom-up fundamental research.
"We try to find that balance between generating the extra income in the portfolio and really limiting the risk. The corporate bond market can be pretty one-directional. You can lose a lot of money if you buy the wrong credits. We spend most of our time trying to make sure we avoid those problem credits," Powers says.
As far as generating income is concerned, the fund primarily looks to bonds (particularly corporate bonds and industrial bonds) and asset-backed securities, but it also has a soft spot for REITs. Stafford says that REITs are an integral part of the portfolio, with a 14 percent allocation.
"We've been investing in REITs since 1993, when Kimco Realty Corporation (NYSE: KIM) came out with its first unsecured debt deal. Since that time REITs have grown to be a continual core holding in all of our fixed-income products, not just the Plus Bond Fund," Stafford says.
Stafford notes that not only does the fund invest in REIT debt, but also an additional 4.8 percent is invested in REIT preferred stock.
"We think our extra allocation to the REIT preferred stock adds additional yield enhancement to the fund," Stafford says. "REITs are long-lived, marketable assets, and there is tremendous protection for bond holders to lend to REITs in the unsecured market."
McKissick says that while some investors are cautious regarding investing in real estate debt and preferreds, he and his colleagues view it as a great investment to have.
"Some real estate investing is subject to speculative development and use of leverage. As a result, the sector seems to trade cheap, when in fact, real estate, when done properly, is one of the finest investments you can put your money in, period," McKissick says.
According to Stafford, REIT debt and preferreds work well for the fund because the underlying assets and fundamentals of the REIT industry lend themselves to being bondholder friendly. One of the team's favorites is Weingarten Realty Investors (NYSE: WRI), which has a 1.2 percent allocation in the fund.
iStar Financial, Inc. (NYSE: SFI), at an allocation of 1.6 percent, has also been a core holding of the fund for almost five years.
"We think they fill a very particular niche in the real estate finance market," Stafford says.
Health Care REIT, Inc. (NYSE: HCN) has a unique position in the fund, as there is an allocation to both the debt and preferred stock.
While choosing REITs and other companies to invest in can be difficult, management fulfills its team mantra by soliciting picks from the analysts and then discussing how each potential investment fits in with their strategy and philosophy.
"Westcore has widespread employee ownership," McKissick says. "Everyone here is an owner/member of the firm, and that helps to fortify the culture that allows us to be disciplined long-term, team-oriented investors and that we believe over time will work well for our clients."
