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| Craig Ruch |
Victory Capital Management is looking at intermediate to long-term corporates and is aiming to shift up to 5% of its $4 billion portfolio out of Treasuries and into credit. Craig Ruch, head of credit at the Cleveland-based shop, said, "We've kept a little powder dry in the intermediate and longer term Treasuries and if I saw value I'd shift up to 5% [into credit]." Ruch's strategy is to add on a specific credit basis and buy on dips. One such name the manager recently bought was the MetLife 30-year issue which Ruch found attractive. Ruch joined Victory this spring from Credit Suisse Asset Management as part of the Cleveland firm's effort to grow its credit portfolio and take on bigger bets (BW, 4/11). Since then, he has shifted 3% into credit, bringing the allocation to roughly $1.5 billion. "We've been adding risk on a selective basis. We're looking for supply and demand imbalances in the market, but it's tough to find that as valuations aren't generous and we don't see any big picture problems," he explained. Victory has recently added names in the homebuilder space and some MBNA paper, which Ruch thinks is still cheap to Bank of America. He also recently participated in the ResCap deal. "We're already overweight to yieldier short corporates; we've room to add in longer duration buckets," he noted.
Ruch highlighted idiosyncratic risk as the biggest threat to the market, where balance sheets look good and default rates are at historic lows. "The reality is the biggest risk is idiosyncratic risk, with shareholder friendly actions like Kerr-McGee...We need to be mindful of that," he stated. Ruch is wary of sectors such as the supermarkets, which are low margin businesses and are "ripe for additional leverage." Overall, Ruch is bullish on the economy but doesn't think credit spreads will tighten substantially as they are already quite tight. Victory is benchmarked to various Lehman Brothers intermediate and aggregate mandates.
