Gartmore Global Investments plans to raise its duration to closer to that of its benchmark by putting cash to work in longer-dated Treasuries. Dan Portanova, managing director and portfolio manager of $150 million in taxable fixed income in Irvington, N.Y., says the U.S. arm of the U.K. money manager wants to use the recent back up in rates to add duration.
Gartmore runs an intermediate bond fund against the Lehman Brothers government/corporate credit index, and its duration is about 80% of the index's 3.72 years, at 3 years. "We want to get a little closer to our benchmark and reduce some of the shortness," he says, adding, "we would do it in the Treasury market because it's difficult to make duration decisions by trading corporates."
Portanova calls the recent back up in Treasury spreads "unprecedented" for such a short span, and as a result the firm will take on some more duration to add yield. He says Gartmore may buy $7 million in 10-year Treasuries, to bring its duration up to around 3.4-years.
The move would add about 5% to Portanova's allocation to Treasuries, which currently account for about a third of the portfolio. The remaining two thirds of the fund are held in investment-grade corporates and Portanova intends to keep these positions steady given the recent fall in prices. It corporate holdings include credits from financial and industrial names such as Morgan Stanley and Alcoa.
