WHO: Varun Mehta is Director of Public Fixed Income at Mason Street Advisors, LLC, Milwaukee, WI, a subsidiary of Northwestern Mutual. He is Associate Portfolio Manager for General Account Fixed Income Assets. He also manages the Mason Street Select Bond Fund and the fixed income securities in the Mason Street Asset Allocation Fund. He joined Northwestern Mutual in March 1997. From 1993 through March 1997, Mehta was with the Ameritech Investment Management Department serving as Portfolio Manager-Fixed Income. The Select Bond Portfolio in the Series Fund Family managed by Mehta has received the Lipper Award for being the best performing Corporate “A” Bond Fund in its category for the 1 and 5 year periods ended in 2002 and for the 1 year period that ended in 2001. Mehta has his undergraduate degree from the University of Bombay. He received a masters’ from the IIM, Bangalore and an M.B.A. from the University of Chicago, Graduate School of Business. Mehta is a Chartered Financial Analyst.

STRATEGY: “Our objective is to deliver long term superior performance to our clients in a prudent and disciplined manner. We are active managers, oriented on total rate of return; which means we are more concerned with the sum total rather than about returns from income or capital appreciation,” says Mehta. “A bond can only do so well on the upside, but the downside remains large. We have been absolutely focused on the portfolio to deliver our good results. This comes from a disciplined approach.” Mehta says he avoids future troubles by studying the financials of a company very closely—this has been key to his success. Monetary policies worldwide are easy and getting easier. This coupled with a deflationary trend in the world economy makes it a favorable case for bonds, says Mehta.

PORTFOLIO: "We try to be agile in the portfolio mix," says the cautious Mehta. He doesn't like sectors like automotive, chemicals, paper, retailers-sectors that depend heavily on an improving economy. Telecom is simply loaded with over-capacity and debt. Sectors that Mehta likes are the financial sector-banks, insurance companies and brokerages-where low short-term interests and relatively high long-term rates render the sector extremely attractive. The pharmaceutical sector has good liquidity, ROI, low leverage and reasonable valuations.

ADVICE: “The economy is likely to be stuck in a below trend growth mode with the potential for further slowdown or outright recession,” cautions Mehta. “Bonds in this scenario provide good diversification for a portfolio. Active asset allocation with a mix of stocks and bonds is important in order to reach long term investment goals.”