Lutheran Manager Will Raise Treasuries, Mortgages

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  • 06 Oct 2003
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Thrivent Financial for Lutherans is planning to increase its allocation to Treasuries and mortgage-backed securities and reduce its exposure to corporates to mirror the recent changes in the Lehman Brothers aggregate bond index. Steve Lee, manager of $500 million in combined index fund portfolios in Minneapolis, says it will make slight increases to its T-bill and MBS allocations because of the index's change. As of this month, the minimum size for inclusion in the widely used benchmark is $200 million, up from $150 million. "That means an index with slightly less in corporates and slightly more in Treasuries and mortgages," Lee explains.

Mortgages account for 34% of the index, corporates account for 27%, Treasuries for 22% and agencies are around 12%. The remainder is made up of asset-backeds, commercial mortgage-backeds and other instruments. Lee expects the index's change will result in small changes to the index, on the order of 40 or 50 basis points, in each affected sector's weighting.

To tweak its portfolio to stay in line with the index, Thrivent Financial will add a marginal amount of MBS and Treasuries and sell corporate bonds such as 10-year Weyerhaeuser Co. notes. "Our paper analyst is a bit more cautious," Lee says, noting that Standard & Poor's recently lowered short-term ratings of paper companies a notch. Any Treasuries it adds will be done across the curve, to keep the portfolio neutral to the index's 4.4-year duration.

  • 06 Oct 2003

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5 Morgan Stanley 10,194.88 57 6.62%