World Bank Arm Adding TIPS

International Finance Corp., the investment arm of the World Bank, is overweight Treasury Inflation-Protected Securities and will continue to bulk up on them in the current environment of rising rates and inflation.

  • 17 Dec 2004
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International Finance Corp., the investment arm of the World Bank, is overweight Treasury Inflation-Protected Securities and will continue to bulk up on them in the current environment of rising rates and inflation. Mark Spindel, cio and deputy treasurer of $13.5 billion of fixed income, sees inflation as a growing threat. "We expect the headline [consumer price index] to continue to rise and create a positive environment for owning TIPS," he said. Spindel manages the organization's reserves from Washington.

Spindel said his fund is positioned defensively, but declined to elaborate. He expects the Federal Reserve will continue on its path of monetary tightening, but noted there is a chance it will skip raising rates in the coming months. "It's possible the Fed will take a break, possibly in one of the first two meetings of next year," Spindel said.

The IFC is invested nearly 25% in asset-backed securities and almost 25% in Treasuries, with a heavy emphasis on TIPS across the yield curve. The other 50% is made up of sovereign debt, including European countries and Japan, and agencies such as Fannie Mae and Freddie Mac.

The manager uses a variety of benchmarks, including the Lehman Brothers Intermediate Treasury Bond Index and LIBOR. Compared to its benchmarks, the organization's assets are overweight Treasuries and TIPS.

The IFC's reserves are split into three components ­ a nearly $1 billion segment of overnight cash, an $8 billion segment benchmarked against LIBOR and a $3.5 billion intermediate component with a total duration of three to four years.

  • 17 Dec 2004

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