Markets have gone through countless defining moments over the past century. In a new series, Loomis Sayles’ portfolio managers reflect on the market events they remember the most and the experiences that shaped them as investors.

Q: What market event had the greatest impact on your development as an investor and what lesson did you take away from it?

Rick Raczkowski, Co-Head of the Relative Return Team, Portfolio Manager
Market Memory: The most memorable periods for me have always been those moments where the market has given us, in baseball terms, “the fat pitch.” Those are the opportunities to take advantage of dislocations and generate alpha for our clients. They are often the scariest moments, but they can also be the most rewarding. During the global financial crisis (GFC), we were not only able to take advantage of significant dislocations in a very difficult time, but we also did an excellent job of protecting capital leading into the crisis.

In fixed income, reducing risk, maintaining liquidity and patiently waiting for dislocations can be uncomfortable because you often have to do it when conditions still appear favorable. That discipline can be difficult because it means giving up yield in the near term. We’ve been successful when we made those hard decisions on behalf of our clients, reducing yield and income when we believed opportunities were limited and risks were building. Then when dislocations occur, we have the flexibility to take advantage of them. Success comes not only from having the discipline to prepare for it, but also the conviction to make the decisions to shift gears.

Takeaway: One of the things that we’ve always paid close attention to, starting with the GFC, is the importance of central banks and fiscal response. When those institutions react in certain ways, they establish a floor for economic growth and eventually for defaults. The GFC was a great example of that. Over time, you learn to recognize these signals, and that experience gives you the confidence to act on them. That’s how we can create value for our clients, which is ultimately our goal. One of the most important lessons I’ve learned is that the investments that feel the most uncomfortable in the moment can often prove to be the most rewarding.

Scott Service, Co-Head of the Global Fixed Income Team, Portfolio Manager                                                         
Market Memory: I was a telecom analyst back in the late 1990s and early 2000s, when companies were investing heavily in the buildout of fiber networks and spending billions on 3G wireless licenses across Europe. I spent three years in Paris covering the US telecom sector before transitioning to coverage of the European telecom companies. There was a lot of enthusiasm around the need for larger and faster networks to support the growth of digital content and video. In many ways, the thesis was right, but it arrived much later than many investors expected. It took more than a decade before services like Netflix emerged and the demand for those networks fully developed.

Takeaway: It reminds me a lot of what’s happening with Artificial Intelligence (AI) today. My experience covering telecom really shaped both my perspective and expectations for AI. Like the internet before it, AI is the next technological frontier, but the adoptions of transformative technologies often take longer than expected. There’s a great deal of inertia within organizations and it takes time to integrate new tools, learn how to use them effectively and apply them to areas such as portfolio management and research. In the early stages, I think people get exuberant about the spending and infrastructure build out, but the practical application and widespread adoption of these tools take time. As a result, the economic benefits and investment returns can also take longer to materialize.

IMPORTANT DISCLOSURE

This marketing communication is provided for informational purposes only and should not be construed as investment advice. Investment decisions should consider the individual circumstances of the particular investor. Any opinions or forecasts contained herein, reflect the subjective judgments and assumptions of the authors only, and do not necessarily reflect the views of Loomis, Sayles & Company, L.P. Investment recommendations may be inconsistent with these opinions. There is no assurance that developments will transpire, as forecasted and actual results will be different. Information, including that obtained from outside sources, is believed to be correct, but we cannot guarantee its accuracy. This information is subject to change at any time without notice.

Nothing contained herein constitutes investment, legal, tax or other advice nor is it to be relied on in making an investment or other decision.

Commodity, interest and derivative trading involves substantial risk of loss.

Diversification does not ensure a profit or guarantee against a loss.

Market conditions are extremely fluid and change frequently.

Any investment that has the possibility for profits also has the possibility of losses, including loss of principal.

There is no guarantee that any investment objective will be realized, or that the strategy will be able to generate positive or excess return.

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