Gartmore Investment Management, which manages £1.5 billion in corporate credit, has taken profits in telecoms and is biding its time before reinvesting. Paul Skinner, product specialist for fixed income at Gartmore in London, says he started to take profits in Deutsche Telekom and France Telecom once they were trading through 150 basis points over gilts.
Skinner says the profit taking is a short-term move. "Positions that we would buy back would probably be in the telecoms. They are much healthier businesses now, but the market has run a long way in them and a pull back would probably be quite fierce," he says. Gartmore's benchmark index, the Merrill Lynch non-gilt, is yielding about 5% versus 4.5% on gilts of a similar duration. Skinner plans to wait for the index by another 20 basis points versus gilts before reinvesting.
Gartmore has also taken profit in Wal-Mart and sold its holdings in Chelsea Village's bonds. Chelsea Village's bonds had been trading below par (in the low 80s) but rallied to par once the football club's sale to Russian businessman Roman Abramovich was announced. Skinner says he is also looking to take profits in financials. Currently he is overweight lower tier-two paper.
In the meantime, Gartmore has taken a position in gilts to provide the portfolio with liquidity whilst Skinner waits for corporates to widen out sufficiently to reinvest. He has also bought triple-A asset-backed issues to garner yield. Over the past few months he has picked up Metronet, Connect M77, Equity Release Funding and BBC's sale and leaseback.
