Reinhart, Mahoney & Bryden Capital Management recently completed a re-allocation program, and will sit on the sidelines until the Federal Reserve completes its easing cycle, according to portfolio manager Jeff Bryden. In the interim, the fund is putting new money into Treasuries to maintain a neutral duration. In December it added $70 million worth of high-grade bank and captive finance paper exposure in order to benefit from the Fed rate cuts, $70 million worth of short-term asset-backed securities because they have less credit exposure than corporate bonds, and $35 million worth of Treasuries.
Bryden, who manages $700 million in taxable fixed-income for the Milwaukee, Wis.-based firm, won't add new money to banks with exposure to California utilities but won't sell its current exposure to these banks because the bonds are too cheap. "It is still good money, spreads have widened and it is just a reflection of greater risk, but the paper will still do fine," he says.
"We focus on the sectors more than specific credits. We'll buy whatever is available and the cheapest at that moment," says Bryden. "The mathematics of bonds are more important to us than anything else." The funds are measured against different benchmarks, and each portfolio remains neutral to its bogey. The portfolios are allocated 60% corporates, 20% Treasuries and 20% ABS, mortgage-backed securities and collateralized mortgage obligations.
