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By John Rekenthaler | 06-23-2010 04:09 PM

Romick: Not the Same Opportunity in High Yield

The FPA Crescent manager on the fund's high-yield stake today versus a year ago.

Securities mentioned in this video
FPACX FPA Crescent

John Rekenthaler: Hi. This is John Rekenthaler of Morningstar here at the Morningstar Investment Conference with Steve Romick of FPA Crescent Fund. Steve has run the FPA Crescent Fund since its inception in 1993 very successfully, that's why we invited him here. And the fund has a 5 Star rating for every time period that Morningstar rates it. So it probably behooves us to pay a little bit of attention to what Steve is saying today.

So, Steve, let's start off with – you were here a year ago, and a year ago we were talking about a slug of high yield bonds that you had in your portfolio. I think at that time you were maybe already starting to wittle that position down a little bit. But anyway, it was a very successful position in 2009. Where are you with high yield bonds now and where is the market?

Steve Romick: High yield bonds in the portfolio kind of peaked through the mid 30s. And we had taken it up in a period of three, four months from 5% all the way up.

Rekenthaler: This was at the end of 2008?

Romick: 2008 and into the beginning of 2009.

Rekenthaler: Okay.

Romick: So when we were here – ever since last year I was in – we actually – it was a month earlier a year ago, so we definitely were not trimming back at that point in time. We were in our full position. We were probably about our peak at that point in time. And since then it's snapped down to about 19, 19.5% of the portfolio. The yield at the end of March of '09 on the corporate debt was almost 23%. The yield at the end of March of 2010 was 8%.

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