The fund follows the Lehman Brothers Mortgage Index. The duration of the fund mirrors the Lehman Index, that is, it is under four years. The overall portfolio is duration neutral in relation to the index, Bayston pointed out.
In its current allocation, 40% of the fund's assets are in different Fannie paper, another 40% in Freddie assets and 20% are held in GNMAs. Bayston declined to reveal the coupons of these assets. The fund also invests about 12% in adjustable-rate mortgage backed securities and mortgage-related asset-backed securities. Bayston explained that the total exceeds 100% because of forward settlements. Although he said the fund is overweight Fannies and Freddies in relation to the benchmark and underweight in GNMA, Bayston declined to quantify the differences.