London-based F&C Management will be an ongoing buyer of higher rated asset-backed securities and is looking at opportunities in the financial sector. Peter Harvey, head of U.K. credit who oversees £25 million in sterling corporate bonds, says he likes ABS because the asset class offers a good premium in comparison to other corporate bonds. In particular, he likes hospital securitizations, for example last year's BUPA transaction and utility deals such as those from Anglian Water and Glas Cymru. He declined to say which upcoming transactions he may be buying, but any bonds he buys will be in the 10-year and over part of the curve.
Harvey says he sees value in financials and in particular the lower-rated financials that have been kicked about in the market over the past few months. He named Hypovereinsbank, Commerzbank, GE Finance, Abbey National and Household Finance as having been marked down a lot, but still offering value. Harvey has not yet decided which of these financials he might purchase.
For the time being, F&C will avoid insurance companies, industrials and unstructured utility debt. "I still think insurance is going to suffer, because the sector is reliant upon a stock market rise, making it by definition vulnerable," says Harvey. Utilities may suffer from increased leverage and downgrades and industrials will suffer from a slow economy, he adds. "We remain cautious on the market as a whole because of slower growth, if not recession in the Western economies and war," he says.
