Phoenix Investments has rotated 5% of its portfolio, or $100 million, out of high yield into mainly Treasuries, says David Albrycht, portfolio manager with the Hartford, Conn.-based asset management firm. The move was done to hedge some risky positions while balancing duration.
Albrycht says he recently sold Concentric Network (Caa1/B) and Exodus Communications Inc. (Caa1/B-), declining to specify coupons or divulge prices for the sales. With the proceeds, he says he bought mostly Treasuries to remain duration neutral, because the firm wants to balance duration and seeks to add value solely by rotating sectors. Albrycht says that he may consider buying additional domestic high-yield bonds again, without necessarily changing the current 25% allocation. For instance, he may swap out of energy and health and buy into telecom again, but such rotation is contingent upon an economic rebound by the third quarter.
Albrycht manages a $2 billion taxable fund with an asset allocation of 26% MBS (both commercial and residential), 25% U.S. high-yield, 11% investment-grade Yankees (or foreign investment grade corporates), 10% taxable munis, 7% emerging markets, 6% U.S. corporate investment grade, 5% Euro high-yield, 3% sovereign non-dollar denominated bonds (for instance, Mexican peso-denominated securities), 3% treasuries, 2% agencies debentures and 2% cash. With a 4.76-year duration, the fund's duration is almost identical to the benchmark, the Lehman Brothers aggregate index, whose duration is 4.75-years.
