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Spotlight on AIM Alumni

Remember When: AIM’s Call to Invest

Aug 04 2014

 

This month, we take a long look back at a story from the publication, Financial Trends, published in 1981 that noted AIM’s call to invest in bonds. The prediction went counter to some influential investment bankers and economists. It was not just an expected ‘first move’ in rates, but a prediction that there would be a long and deep decline. Gary Crum, VP of AIM and manager of its fixed-income and high-yield securities sector at the time of the article, cited the drop of approximately 300 basis points in short-term interest rates from their highs and said that AIM principals believed that interest rates ‘are going to gradually trend downward’.

The article is so very interesting looking back given today’s contrast of generational lows in interest rates, says Brasada Capital’s Mark McMeans, “As it turned out, investors paying heed to this article would’ve benefitted for over three decades. The next time Gary Crum makes a rate call in the press, I’m really going to pay attention.”

Says Dick Berry, “Bonds were a great place to be. We had double digit interest rates at the time, combined with an inverted yield curve (short maturity bonds having a larger yield than long term bonds). We were at extremely high levels of interest rates, and as rates came down, bonds outperformed stocks for a very long time.”

Dick joined AIM in 1987 and ran the firm’s municipal bond mutual fund and a few private accounts. “It was Institutional money market funds that first made AIM profitable. I was originally AIM’s customer when I worked as head of fixed income for a large bank trust department. We were AIM’s largest client. While I was at the bank, the controller of currency wanted me to reduce our exposure to AIM’s money market funds. I said give me a year. He did, and sure enough the fund grew so much that our exposure went from 50% to less than 25%. I got to know the people at AIM well then.”

When Dick realized the bank for which he worked was going to go through a merger, he approached Ted Bauer and Ted was interested in hiring Dick. “AIM had started a municipal fund,” explains Dick. “That was the inception of our municipal funds. I started in Dallas and in 1992 AIM acquired the CIGNA fund assets. It was a sizable municipal fund so I moved to Houston.” Dick went on to become AIM’s Chief Investment Officer of municipal bond investing, and was the lead manager on the AIM Tax Free Intermediate Fund for just under twenty-five years, and the AIM Municipal Bond Fund for just under twenty years.

In addition to bonds, the article quotes AIM President Ted Bauer on his expectation that investors would not abandon money market funds. “I think the money market funds are permanent,” he said. “People are used to them. They like them. They’re getting good service on them, and they’re getting competitive rates.”

“They don’t have to think about re-investing every six months. There are now some $160 billion or so in the funds, and the funds may lose some of that if stocks get going, but it’s going to be a permanent part of the market,” continued Bauer.

INVESCO later acquired Van Kampen and when the decision was made to move the municipal people to Chicago, Dick began looking for the right opportunity which would keep him in Houston. “I had no interest in moving to Chicago. It was a natural fit to take my private accounts and move to Brasada. I joined a number of other AIM colleagues here and we are actively seeking to manage some additional private accounts or to work as a subadvisor to mutual funds”, says Dick.

 

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