Fiduciary Trust International, which has $18.7 billion in fixed income, is increasing its emerging markets allocation by selling high-yield securities and Treasuries to buy Polish, Russian and Brazilian securities. Rob Waldner, portfolio manager of the Core Plus portfolio, said the recent sell off in emerging markets in the last month was overdone and based on fears of higher interest rates. Waldner is building the emerging markets position, currently at 2% of the portfolio, although he did not specify what the target is.
Waldner has used Treasuries and high yield to fund the emerging markets addition and has reduced his high-yield allocation from 10% to 5% from the start of the year.
The fund has pared risk to have a relatively defensive portfolio and remains short in duration, at a quarter of a year shorter than its bogey, the Lehman Brothers Aggregate Bond Index. The index's duration is 4.75 years.
In addition to the 5% in high-yield credits, the Core Plus fund has a neutral allocation of 30% in investment grade and 25% in mortgages. Another 12% is held in non-U.S. government and corporate bonds from Norway, Germany, Japan, Mexico and Italy. More than half of that allocation is hedged to the dollar. There is also 10% in cash, 8% in Treasuries and 6% in munis.
