Segall, Bryant & Hamill is looking to assume additional risk in its portfolio, either by moving down in credit quality or by adding to its mortgage-backed holdings. Greg Hosbein, portfolio manager of $1.5 billion, says the firm will shift about $30 million out of higher quality corporate or agency paper into lower-rated corporates or mortgage pass throughs in order to pick up additional yield. Before making the trade, Hosbein wants to wait for further spread widening in the secondary market, which he believes will occur as war-related concerns gather momentum.
Hosbein says he cannot anticipate specifically which securities the firm will buy, though if they are corporates, they will likely be triple-B or single-A rated and of intermediate maturity. Segall, Bryant recently bought some $5 million of the Avery Dennison 4.875% notes of '13 (A3/A) which priced at 85 basis points over Treasuries.
On the mortgage side, the firm added some $10 million 15-year 5% Fannie Mae pass throughs. It sold 10-year bulleted agencies and also used cash for the purchases.
To the extent that future purchases come from sales of corporate credit, Segall, Bryant will likely sell some oil-related names. Hosbein declines to name the specific issues the firm would sell, however.
At a duration of 3.84 years in its core portfolios, the Chicago firm is a hair shorter than its bogey, the 3.85-year Lehman Brothers aggregate index. It allocates 39% to corporates, 35% to MBS, 10% to Treasuries, 10% to agency debentures, 5% to asset-back securities and 1% to cash.
