Wilmington Trust is switching out of investment-grade energy bonds that performed well in the rally at the beginning of the year, and buying media and telecom paper that allows it to pick up some yield, according to portfolio manager Clayton Albright. Albright, who manages $500 million in taxable fixed income for the Wilmington, Del.-based firm, has recently been hunting for yield, and characterizes much of the corporate market as "played out." Nonetheless, he recently used new cash to rotate into the AOL Time Warner 65Ž8% notes of '29 (Baa2/BBB), Comcast's 6.2% notes of '08 (Baa2/BBB), and sold the Chevron 7.45% notes of '04 (Aa2/AA).
Interest rates, particularly at the long end of the curve, are low and the market rally has stalled out, says Albright. He characterizes the bond market as range bound for now, arguing that, "There isn't a lot of upside or downside" from present valuations. The firm is staying neutral to its bogeys, the Lehman Brothers Intermediate Government Corporate index with a duration of 3.4 years and the Lehman Brothers Government Corporate with a duration of 5.5 years. The portfolio is allocated 50% corporates, 15% Treasuries, 15% agencies, 15% in asset backed securities and 5% in mortgage backed securities.
