Segall Bryant & Hamill is funneling new cash, $5-10 million at a time, to agencies and existing corporate positions that it feels will withstand the nearing economic slowdown. Greg Hosbein, director of some $1 billion in fixed income, cites Interpublic Group Cos. (A3/A), an ad agency that has withstood past slowdowns thanks to solid financials, and building supply giant Lowe's Companies (A3/A), which could see increased business if housing finance rates fall, as two such credits. He says higher-quality financial services firms without commercial banking exposure, such as Household International (A3/A) and GE Capital (AAA/AAA), are also attractive, because of what appears to be a healthier consumer-loan market. Hosbein declined to disclose details on other corporate credits the firm is eyeing, but says he is focusing on the five- to 10-year part of the curve, which would benefit most from an easing of the Fed funds rate.
Until their spreads fall to the mid-70s, from the current mid-80s range, 10-year agencies also look cheap, says Hosbein. He has been buying them since the fall, when spreads fell from around 110 off the Treasury curve to the mid-90s after the GSEs announced that they would increase transparency. Overall, the Chicago-based firm's portfolio is allocated approximately 33% to MBS, 31% to corporates, 18% to Treasuries, 12% to agencies and 6% to ABS. Duration is about 7% long that of one of its benchmarks, the 4.58-year Lehman Brothers Aggregate Bond Index.
