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| Dan Portanova |
Gartmore Separate Accounts is planning to reduce its corporate bond holdings from an overweight to a neutral position. Dan Portanova, managing director and portfolio manager of $150 million in taxable fixed income in Irvington, N.Y., said the buyer will scale back its credit exposure to take advantage of a rebound in the markets. The firm currently holds a 55% weighting in corporates and will probably reduce that to 50%, or neutral the Lehman Brothers Intermediate Government/Credit Index. Portanova said there are currently two main factors, which compete against each other, that are influencing his investment strategy. Improving corporate earnings bode well for corporate debt. At the same time, some companies such as Alcoa Inc. and Wells Fargo have recently tendered some of their outstanding issues, creating a strong bid for their paper. "Now is a good time to lighten up, we will probably get back down to neutral," Portanova said, referring to the firm's credit exposure. He added there is some speculation in the market that other investment-grade issuers could also tender their debt, leading to tighter spreads and an opportunity to reduce credit exposure. During the corporate market's strong run at the beginning of the economic recovery, the fund held as much as 75% in corporates. The remainder of the portfolio is held in Treasuries.
Gartmore is also putting on what Portanova called somewhat of a flattening trade. "We're trying to reduce our exposure to five years by buying three- and seven-year securities" based on expectations for the curve, he said. This trade would be done on a duration-neutral basis. The index's duration is 3.75 years and the portfolio is currently about 10% short based on rate views, he said.
