Loomis Sayles’ David Rolley Says Company Is Defensive in 2012

David Rolley, vice president of the global fixed income group at Loomis Sayles & Co, which manages $170 billion of investments, comments on the companies outlook for 2012 and why its more defensive this year than last. He spoke at a conference in Doha, Qatar.

“We decided to reposition the portfolios more defensively, not just with respect to holding local assets but essentially all risk assets across the board,” he said. “We were significantly overweight non-Japan Asian currency. We took that down, so its not a Gulf specific perspective. Its a global investor risk appetite of generalized concern. Thats what we are worried about as we look at this year.”

On the losses taken by European banks from the Greek debt crises:

“Collectively, they choose to shrink balance sheet,” he said. “Instead of adding 1 percent of GDP to their equity, they are trying to sell 5 to 10 percent of euro zone GDP from their balance sheet all at the same time, thereby kind of devastating some markets.”

“You look at that and the first question is are they done?” he said. “I would say the answer is no. That’s our first conclusion. They aren’t finished shrinking and there will be a much slower pace.”

On Italy and Spain:

“Italy and Spain are important parts of our benchmarks,not in our credit portfolios but in our sovereign portfolios,” he said. “We’ve been essentially still treating Italy and Spain as stories that have not turned the corner yet but that have a lot of volatility in that story. If they get really pushed down hard, we have to be defensive enough to buy some but we are sellers and we have been underweight the whole time. We are now extremely underweight Italy and Spain.”

On China:

“China lost a step or two in terms of its global growth story and the China trade is big,” he said. “It has a lot of moving parts. Things that are correlated with China range of specific regional names in Asia through the Australian dollar through the Brazilian real through credit spreads in half a dozen countries and so thats a big, big global growth story. We think there is a soft landing. Our soft landing is a little softer than other people’s soft landing and we don’t think they turn the corner until mid year.”

To contact the reporter on this story: Robert Tuttle in Doha at rtuttle@bloomberg.net

To contact the editor responsible for this story: Riad Hamade at rhamade@bloomberg.net

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