Clark Capital Management Group is looking to buy about $12 million in investment-grade corporate bonds to take advantage of an improving economy that should bolster the bottom line for many high-grade issuers. Steven Grant, managing director and head of $120 million in fixed income, says he plans to add high-quality corporate names in the banking sector such as UBS AG and JP Morgan Chase & Co., given the improving economy and low rates. Furthermore, he says the gap between where these banks borrow money and where they are lending it is wide, leading to increased profits and debt servicing ability. "The business model is just a phenomenal one, they are practically stealing money right now," he quips, noting that rates for instruments such as certificates of deposit are below 2%. Investment-grade corporates currently account for 20% of the Philadelphia-based investor's bond portfolio and Grant says he is targeting raising this level to 30% by adding single-A and triple-B names.
To be sure, Clark Capital is not moving too far down the credit spectrum. Roughly 80% of its bond portfolio is currently in agency and mortgage paper, and it traditionally sticks to triple-A assets. "We're not in the get rich game, we're in the stay rich game," he says, explaining the strategy. That being said, Grant says he does not find double-A assets attractive and says that is why he's planning to add single-A and triple-B bonds. Clark Capital runs money against customized benchmarks and strives to maintain an average duration of less than 4.5 years given the expectations for higher rates.
