AIM Investments expects to use new cash to maintain its overweight allocations to financials and industrials, said Bob Alley, chief fixed-income officer. The Houston fund manages $5 billion in taxable fixed income.
"We like financials for their earning power and stable business models. Industrials are attractive for their earnings and cash flow," Alley said. He declined to highlight specific credits and to quantify by how much the fund is overweight the two sectors.
The fund uses several benchmarks, including the Lehman Brothers Aggregate Bond Index. Alley said AIM's corporate allocation is 40%, which is around 15% overweight its benchmark. While Alley noted there is less opportunity in the corporate sector than earlier this year, he still sees opportunity for additional yield in the sector. "Corporate earnings and cash flows are staying strong; there's opportunity to collect coupons in this period when the economy is growing," he added. Alley noted the fund's allocation to healthcare credits is underweight because companies in the sector are highly rated, don't offer much spread opportunity and carry significant headline risk.
AIM is about 8% underweight mortgage-backed securities and governments, respectively. Alley said the fund's duration is around four years, which is underweight by three quarters of a year. He expects to maintain AIM's duration.