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A Sweet Spot for Corporate Bonds: Fund Manager

CNBC
Thursday, 21 Jun 2012 | 12:10 PM ET

In a slow growth economy, corporate bonds will hold their own against equities, Mark Kiesel, Pimco’s global head of corporate bond management and manager of its Investment Grade Corporate Bond Fund told CNBC.

“Corporate bonds can deliver four, five, six percent,” he said on “Squawk on the Street.” With nominal growth of about four percent in the United States and a two percent dividend yield, equities can deliver about a six percent expected return, he argued.

“Over the past decade, corporate bonds have actually produced higher returns than equities with a third the volatility,” he added. That makes them the sweet spot right now for many investors, he said.

Five-Star Corporate Bond Plays
Mark Kiesal, Pimco Corporate Bond Portfolio Management, discusses the top corporate bond bets to make, with CNBC's Tyler Mathisen.

Casinos in Macau, China’s sin capital, are where Kiesel is finding some of the best growth. Five years ago, Macau was roughly the same size as Las Vegas. Today, the steady influx of high-rolling mainland Chinese gamblers has turned it into a $38 billion market he noted.

Now five times the size of Las Vegas, Macau is becoming a bigger part of casinos earnings, he said. Las Vegas Sandsgot 10 precent of revenues from Macau five years ago. Now 88 percent of Las Vegas Sands earnings come from Asia, including Macau and Singapore. Returns are also juicy. “The government charges 39 percent taxes and these companies are still earning returns on capital above 20 percent,” Kiesel said. (Click here for more discussion on casino stocks).

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