Top Fund Managers Advise How to Play the Market
It’s an all-star investing theme day at CNBC Wednesday, and we're talking to five-star fund managers to get their best advice on where to put your investment dollars in the current market.
Let's start with bonds. Things have gotten a lot tougher for fund managers, even those rated five stars by Morningstar such as Jason Brady, head of fixed income and managing director with Thornburg Investment Management.
His funds are up 2 percent so far this year, and he controls $14 billion.
"The market is pretty...global central bank driven. So I’m feeling pretty cautious right now," he told CNBC's "Squawk on the Street". Investors are being driven out of "risk-free assets" like Treasurys and into riskier assets including stocks, high-yield bonds and convertible bonds. That's what he's doing in many of the funds he manages.
"You have to start thinking about risk assets as part of capital preservation, and that’s driving people into stocks and convertible bonds as well," he said. "You have to have a much broader view of risk right now and I think that’s a challenge for some people."
That makes it tough for a fund manager where the goal is capital preservation. "Capital preservation in this market is probably the hardest job we have because when you take away the risk-free assets, you make it risky because you put prices up artificially," he said. "What does capital preservation mean anymore?"
Next up, small-caps . Brian Barish, president and director of Research with Cambiar Investors, told Squawk on the Street in a separate interview the small-cap market can continue to do well. But he warned that "it's a very fragmented and diffused market, so making sweeping generalizations is tough."
However, he is finding "a lot of pockets of interest in technology, industrials, in energy, in healthcare — and just continuing to be opportunistic."
If you take technology, it's been dominated by tech giants, like Apple, IBM and Intel, but, Barish noted, there's a "very diffuse range of companies in industrial, semis, specialty, software — various kinds of services that may be up a little bit for a year but they haven't done a whole lot and valuations remain compressed. So we like that."
As more investors get back into the stock market they are trying to become more educated about where to put their money.
Kathleen Murphy, who runs Fidelity's personal investing division that handles about one-third of the company's $3.7 trillion in assets under administration, told Power Lunch she can't blame investors for becoming more conservative and staying out of stocks after the financial crisis in 2008 and 2009.
She said target funds, which shifts the percentage of stocks, bonds and cash as a person ages to a set retirement year, are a good strategy for people who don't feel confident in making their own asset allocation decisions.
But it's up to brokers and companies like Fidelity to do more to educate investors.
"They learned in a very concrete way how much risk they could stomach," she said of investors. "We need to do more. No question that people weren’t as prepared as they should be" during the downturn.
What about specific sectors? Energy is a hot one as the U.S. works to develop its own oil and natural gas to get off foreign imports. Mark Kiesel, manager of the five-star Pimco Investment Grade Corporate Bond Fund, told Street Signs the companies that have pipeline assets or large acreage positions in some of the big U.S. shale fields are going to profit from this increase in production.