Morningstar - Q2 2023 - 63

At MacKay Shields, the focus is on bottom-up
securities analysis rather than macro-level
bets on interest rates. " We're not really making
big duration bets one way or another, "
says Burke. At any given time, 75% to 80% of the
portfolio is invested in line with the benchmark
index in terms of credit quality and duration.
But from there, the team will layer on what
they refer to as tactical positions. " We'll view
trades like putting on tax-exempts or taking them
off to generate alpha for the fund, or holding
securities outside that five- to 10-year window. "
Last year, for example, the team felt there
was an opportunity to add to performance by
significantly raising the fund's weighting
in tax-exempt munis. The catalyst was the record
selling of tax-exempt muni bonds by individual
investors that pushed yields in that market
to wider levels compared with Treasuries, leading
to a spread advantage over taxable municipal
bonds, where individual investors have
less influence.
" We look to the team that are trading tax-exempts
all day long and can talk about relative value, "
says Burke.
In response, during the June and July period,
the team raised the fund's weighting in
tax-exempt debt to roughly 12.5%, well north of
the typical 1% to 2% exposure. As the dislocation
in the tax-exempt market ebbed, the team
began trimming the tax-exempt exposure, and by
year-end, the allocation was down near 7%.
While the taxable and tax-exempt markets are the
same issuers and the " same high credit quality,
the dynamics are different in each market, " says
Sprauer. " That gives us the ability to take
advantage of those dislocations and deliver alpha. "
While not making outright interest-rate bets, the
team also looks to benefit from opportunities
they see along the yield curve. In 2022, as the
yield curve was flattening and on its way toward
inverting, they tilted toward longer-dated
bonds. In addition, the team upped the cash
holdings in the fund to a higher level than normal
in the February-March period, when it hit a
peak around 7%. From there, it averaged roughly
The investment team at MainStay MacKay US Infrastructure Bond Fund: Michael Denlinger, director;
Scott Sprauer, managing director; Sanjit Gill, director; and Robert Burke, managing director.
morningstar.com/products/magazine
63
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Morningstar - Q2 2023

Table of Contents for the Digital Edition of Morningstar - Q2 2023

Contents
Morningstar - Q2 2023 - Cover1
Morningstar - Q2 2023 - Cover2
Morningstar - Q2 2023 - Contents
Morningstar - Q2 2023 - 2
Morningstar - Q2 2023 - 3
Morningstar - Q2 2023 - 4
Morningstar - Q2 2023 - 5
Morningstar - Q2 2023 - 6
Morningstar - Q2 2023 - 7
Morningstar - Q2 2023 - 8
Morningstar - Q2 2023 - 9
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Morningstar - Q2 2023 - 79
Morningstar - Q2 2023 - 80
Morningstar - Q2 2023 - Cover3
Morningstar - Q2 2023 - Cover4
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