When to Hold 'em

Hold to maturity. That mantra is pretty much carved over the door to Marilyn Froelich’s office at Advantus Capital Management, a division of Advantus Insurance Advisory Group in St. Paul. Her group manages more than $16.7 billion in fixed-income assets, primarily for insurance companies. Advantus buys bonds from sound, stable companies with the ability to pay the interest on their obligations. Froelich is a 30-year veteran of the fixed-income market, and serves as the director of the Advantus group and as a portfolio manager as well.

How does investing for the very long term differ from most other styles?

Froelich: Our focus is on the downside rather than the upside. Our real focus is capital and principal preservation with incremental excess income. In contrast, if you’re looking at a total-return style of fixed-income investing, people are looking at the upside—hitting the home run. We are looking at protecting against negative surprises.

How might your style apply to an individual investor in the current market?

Froelich: It’s very conservative and long run. In the long run, you absorb the bumps better. Everybody laughs at me here because I’ve never been high on the stock market. And given the current situation, we have a few people here who are now saying that their plans for retirement have been extended. Mine haven’t! My personal portfolio is not very exciting.

My impression is that in the past several quarters, few sectors of the bond market have been spared. How has your firm’s portfolio been affected by the indiscriminate selling that has taken place?

Froelich: In a couple ways. Market valuations are off, just like everywhere else. But the insurance industry isn’t required to reflect the current market value of its securities on a current basis.

So you don’t have to worry about that?

Froelich: I’m not saying you don’t have to worry about that, because it might be the start of a trend that eventually could be a hit to your portfolio. Yes, we see the valuations. We’re pricing on a monthly basis so everyone can see how their portfolio has changed. But you don’t have to run that through your bookkeeping like a pension company or a bank. So we have the ability to hold to maturity—just like an individual, like I do in my personal account. I have a bunch of municipal bonds in there. They’ve held up very well, but I have some other corporate bonds in there, too. The valuations are off, but they’re good bonds, and I’ll get my principal back.