William Larkin, fixed income portfolio manager of $300 million at Cabot Money Management, is positioning his investments to still retain value even if the economy should slip by locking into 5% yield with minimal credit risk. "I want to be in a position where I am not impacted by any short term variables. I want to focus solely on the income and not worry too much about duration," Larkin said.
Larkin's investors are mainly high-net-worth clients. His allocation includes 18% in corporates, 4.5% in bank loan funds, 3.5% T bills and 74% in government agencies. He utilizes the Merrill Lynch Domestic Master Index for A rated credits and above. "I like to utilize this index because it lets me buy anything in the bond market as long as it is rated A or higher. It helps me maintain my high quality stance for my portfolio," he added. "Right now all my corporates are AA or a strong A." Larkin's duration is around five years and he describes it as "a little long."
He does not see anything that interests him in the new issue market at this time, but does monitor it closely. Larkin declined to mention specific sectors he is looking at. "I like to look at the new issue market as almost like another benchmark for me. If there is a new issue in New York, where one of my clients is, then that's what I have to beat so he can get the most value out of his investments," he commented.
Any new cash Larkin has coming in, he invests according to his normal investment plan. "I like to try and maintain my strategy whenever possible, even with the new cash that I get. At this point, I'm also doing whatever I can to try and avoid call risk," he added.
