William Blair Investment Management is seeking to sell $100 million of off-the-run eight- to 10-year U.S. Treasuries in order to purchase lower quality triple-B rated corporates. The move will reduce duration to 85% that of the firm's benchmark, the 3.75-year Lehman Brothers Government/ Corporate index. Bentley Myer, portfolio manager of $2 billion in taxable fixed-income, says he needs to see consistent job growth of 100,000 to 150,000 per month and signs that weekly jobless claims will stay below 390,000 and continue to decline, before he makes the shift. In addition to using the cash from the sale of Treasuries, the firm may buy corporates with some of the money it raises through refinancing of mortgage-backed securities, or it may keep that money in cash.
Myer says William Blair is looking at lower-rated corporates in an effort to pick up additional yield. He also believes corporate spreads will continue to tighten somewhat, even though they have already narrowed considerably this year. He declined to specify what credits he was considering purchasing.
The Chicago money manager allocates 50% of its holdings to MBS, 30% to corporates, 15% to Treasuries and 5% to cash. Last week, William Blair's portfolios had a duration of 3.35 years, or 89.33% of its bogey.
