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| Dan Portanova |
Gartmore Separate Accounts may pick up agency paper if yields widen, said Dan Portanova, managing director and portfolio manager of $150 million in investment-grade fixed-income in Irvington, N.Y. "We've owned agencies in the past, but have viewed agencies as credit risk, not as Treasury surrogates as much of the market does," Portanova stated. Gartmore currently does not own agencies but if prices materially deteriorate, the fund will buy them, Portanova said. He declined to be more specific about the potential move.
The fund currently has a 60% corporate allocation, which is overweight the 50% allocation of its benchmark, the Lehman Brothers Intermediate Government/Credit Index. Portanova said it also has a higher quality rating than its index due the nature of his clientele, who want a high-quality, liquid portfolio. Tight spreads are also a factor. "We're in a situation where, on a historical basis, we're as tight as we have been," he said, adding he thinks the good news has already been priced into the triple-B range and he is concerned about headline risk in sectors such as insurance and pharmaceuticals.
Portanova said high-beta names that have performed well have run their course and he likes industrial names such as Alcoa Inc. He also participated in the recent Amgen Inc. deal and said it was attractively priced at 485 basis points over Treasuries. The fund also likes diversified financials such as Wells Fargo. The fund is overweight industrials, neutral financials, and underweight utilities and transportation. He declined to quantify its weightings. Treasuries are the balance of his composite at 40%. Portanova added "the bond market will continue to confuse people and trade better than expected."
