Cavanaugh Capital Management may reduce its U.S. Treasury allocation by as much as 8% ($26 million) after the Federal Reserve's Aug. 21 meeting. Megan Brune, a portfolio manager at the Baltimore, Md. money manager, says the firm would look to sell long-term Treasuries if Fed officials and economic data indicate the economy is improving. An improving economy would likely spur investors to transfer assets out of bonds and into stocks, Brune says. She adds that Cavanaugh would probably shift the assets into seasoned mortgage-backed securities with a relatively low prepayment risk, such as Freddie Mac gold pool balloon mortgages.
Of its $323 million in taxable fixed-income assets, Cavanaugh allocates 31% to MBS, 25% to Treasuries, 16% to taxable munis, 15% to agencies, 8% to cash equivalents, 3% to corporates and 2% to asset-backed securities.
