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| John Cerra |
TIAA-CREF is looking to add to its TIPS holdings. The asset class has become more attractive as higher inflation seems entrenched with oil prices sticking at more than $50 per barrel, said John Cerra, lead portfolio manager of $10 billion in investment-grade taxable fixed income from New York. Cerra declined to say how much in TIPS he would add, but noted TIAA-CREF has about 1-2% of its portfolios invested in TIPS. "You're giving up yield and breakevens are a little high, but it seems like a very prudent asset," he said. About $2.4 billion of the assets Cerra runs are in Treasuries. Within the asset class, Cerra is about 30% underweight two-years, slightly overweight 10-years and neutral the long end of the curve. With his current strategy, Cerra takes the money from the two-year's underweight and invests some of it in the 10-year sector but puts the majority into cash as prices on the two-year falls as the Federal Reserve continues to raise rates.
Another $1.1 billion of Cerra's portfolios is invested in agency debentures. Within agencies, the manager finds value in the five-to-six-year part of the curve, especially in off-the-run issues. Cerra finds this area appealing because such securities have higher yields, which will tighten to Treasuries as the bonds near maturity. Cerra declined to give examples of recent issuances he had purchased.
Within agencies, Cerra mentioned he has made substantial moves selling Federal Home Loan Bank debentures and buying Fannie Mae and Freddie Mac bonds due to a recent tightening of FHLB bonds versus the other agencies. He declined to give more details.
Cerra's benchmark is the Lehman Brothers Aggregate Bond Index.
