Segall, Bryant & Hamill has been reducing corporates exposure over the past several weeks by a total of 6%, or $90 million, by swapping into current coupon MBS, on the view that the refinancing wave is largely over in the mortgage sector, says portfolio manager Greg Hosbein. Hosbein, who helps manage the firm's $1.5 billion fixed-income account, says the brutal prepayment cycle of the last several months has cheapened up the 6.5% conventional mortgage sector. Another factor underlying the move is that the firm has been overweight the corporate sector for nearly three months, convinced that the Federal Reserve's aggressive easing policy would disproportionately benefit corporates. With its view that the Fed is likely to shift to a neutral stance soon, it has have begun taking some profits on unspecified credits. Hosbein does note, however, that the firm does retain positions in Masco (Baa1/BBB+), Lowes (A3/A), Household International (A2/A) and AXA Financial (A2/A-).
The Chicago-based company has an asset allocation of 36% investment-grade corporates, 30% MBS, 16% U.S. treasuries, 10% agencies and 6% short-maturity ABS. At a 4.89 year duration, the fund is slightly long its benchmark, the Lehman Brothers aggregate index, at 4.61 years.
