BNY Asset Management is looking to shift assets into lower-rated corporate issues in a bid to pick up yield. Margo Cook, portfolio manager overseeing $4.5 billion in taxable fixed-income, says given the already wide spreads at which triple-B and single-A corporates are trading, they would have to widen significantly from last week's levels to underperform Treasuries over the next six to 12 months. Cook says economists are seeing good signs of a recovery, especially regarding capital expenditures by businesses. Once it sees a bit more stability in the stock market, BNY will shift up to 5% of its assets (or $225 million) out of 10-year brokerage credits, which have performed well relative to other corporate issues, and into 30-year industrial names, which have lagged the corporate market. Cook cites Lehman Brothers' data showing that longer-dated industrial issues returned just 3.79% year-to-date through August--well behind the financial sector, which has generated 9.73% returns.
Cook says BNY may look to sell U.S. agency debentures to raise money to buy more industrials. Last week, the firm was roughly neutral the Lehman Brothers aggregate index, and was considering moving to an underweight. She declined to be more specific, however.
The New York money manager is 5% short its bogey, the 4.07-year Lehman aggregate index. It allocates 40% to mortgage-backed securities, 26% to corporates, 12.5% to agencies, 12.5% to Treasuries, 8% to asset-backed securities and 1% to cash.
