Finance

A Mutual Fund Whale Makes Big Bets on Junk Bonds—Using ETFs

Manager Matt Pasts tries to time the market. Are his dramatic moves shaking up the market?

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By Sridhar Natarajan

March 8, 2018 at 10:00 AM UTC

This article is for subscribers only.

This article is part of the March 12, 2018 issue of businessweek.

In early February, most of the investing world was watching stocks take a tumble. Matt Pasts, the manager of BTS Tactical Fixed Income Fund, which was invested almost entirely in junk bonds, studied a computer model used by his small investment firm in Lexington, Mass. The model gave him a distress signal: Sell. On Friday, Feb. 9, Pasts sold all of his $900 million mutual fund’s high-yield bond investments so that the fund was fully in cash.

BTS Asset Management Inc. employs no credit analysts to study the fundamentals of bonds. Pasts is a market timer, trying to suss out whether the whole high-yield asset class is going to rise or fall in value. He watches trend and momentum measures, such as the moving average of the price of exchange-traded funds that track the junk bond market. When not in junk, BTS is either in Treasuries or cash.