Hoisington Investment Management Company is slowly trying to market the $50 million Treasury Inflation Protected Securities portion of its portfolio.
The Austin, Tex.,-based manager launched a TIPS product a couple of years ago and has been trying to grow assets in the product through word-of-mouth marketing ever since, according to Lacy Hunt, vice chairman of the firm's strategic investment committee.
The firm has more than $3 billion under management, entirely invested in Treasuries. The company is fully invested in the long end of the curve, with coupon bonds ranging from 22 to 27 years and zero bonds ranging from 17 to 25 years, Hunt said.
The firm takes a long investment view of two to four years. "When the generalized trend for multi-year inflation is rising, then we invest in Treasury bills or TIPS. But when the generalized multi-year trend is for a decline, we go for long." Hunt said. The company has been long since 1990 because inflation has been on a downward trend since then, he noted. However, Hunt said the firm would move from a long to short duration if he thought inflation was an upward trend. He declined to forecast inflation.
Hunt uses the Lehman Brothers Aggregate Bond Index as his benchmark, despite the fact it has a 35% weighting in Treasuries. The portfolio's duration is 16 years, compared to the Lehman Ag's 4.3-year duration.
