Barry Allan: What Sets You Apart as a Fixed Income Asset Manager?

January 8, 2021

3 minute read

Barry Allan started DMAT Capital Management in 2019 shortly after his departure from Marret Asset Management, so that he could run money with more focus and flexibility. Fast forward to late 2020 – DMAT Capital Management has been tapped by Horizons ETFs to sub-advise two ETFs, Horizons Active High Yield Bond ETF (HYI), which it took over in early November 2020, and one of Horizons newest launches, Horizons Tactical Absolute Return Bond ETF (HARB).

"When you found companies and you work on them and you build them up for 20 years, they become bigger, you have bigger staffs. They become a little more bureaucratic," says Allan. "I just think that the world requires a much more tactical approach, as I said. I wanted to start a firm that was going to be smaller, more flexible and more focused than what I had been involved in the past, because I think that’s really the way where the world is going."

In this 5th segment, Barry Allan talks candidly about what he believes sets his firm apart from other fixed income investment and credit managers. You can watch the previous three segments here: Part 1 & 2, Part 3, and Part 4

Barry Allan's thoughts on the future of fixed income
"I’m cautious in the near term, on credit markets for all the reasons you’ve mentioned, but I’m not bearish. I think what the central banks have accomplished in the marketplace leads you to believe you can be cautious. But don’t be bearish because a bearish view, which requires the markets to decline materially or in this case for credit spreads to widen materially, for your view to be effective, the probability of that is relatively low, given the stance of the central banks.

Having said that, in 38 years of doing this, I’ve never seen the worst risk reward in the credit markets than we’re in now. You have the highest leverage, highest default risk, and you have the lowest credit spreads that I’ve seen all the way through that timeframe, but that’s the fact of life. You could be bearish and invest in cash alternatives and earn 1%, or you can adjust, to take the yields that you think are safe and then maybe invest in things that are a little more riskier, offset by short positions in high yield indices, which allow you to capture a higher yield without taking that on that additional volatility.

That’s really what our strategy is, but you have to realize that… We’re not going back. Interest rates are not going up other than small cyclical upticks like we maybe observed in the last couple of months, and we may see in the next six months or so, but my long term view on inflation is that it’s falling much more rapidly. Whatever small uptick in inflation we have in the short term is simply due to a decline in the US dollar, and the US dollar can’t really decline for multi-years in my view, because if that happens, the rest of the world’s currencies have to go up and if their currencies go up, then that hurts their economic growth. Then it starts to affect US economic growth."

Source: Generation ETFs

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Horizons Active High Yield Bond ETF (HYI), is now sub-advised by DMAT Capital Management Inc. DMAT assumed sub-advisory responsibility of HYI as of November 4, 2020.

Horizons Tactical Absolute Return Bond ETF (HARB) is a new ETF, sub-advised by DMAT Capital Management Inc. It will provide an actively managed fixed income strategy with the flexibility to “go anywhere” for tactical investment opportunities, which could be more important now than ever before.

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Barry Allan is the President, CEO and CIO of DMAT and has more than 38 years of industry experience running investment mandates across the full spectrum of the fixed income world, including Government bonds, investment-grade bonds, high-yield bonds and distressed bonds. Prior to founding DMAT, Mr. Allan founded Marret Asset Management in 2001, and built it into a full-service asset management firm, which when he left in 2019, had assets under management of more than $4.4 billion. Mr. Allan has also held senior positions with Altamira Management Ltd., where he managed a wide range of global fixed income mandates, and Nesbitt Burns, where he was a proprietary trader, Director, and head of fixed income derivatives.