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N.Y. Investor Slashes Corporate Exposure

Gartmore Separate Accounts is likely to cut corporate exposure by another 5% to bring its credit weighting to 40% of its $150 million investment-grade portfolio.

Dan Portanova

Gartmore Separate Accounts is likely to cut corporate exposure by another 5% to bring its credit weighting to 40% of its $150 million investment-grade portfolio. It had been as high as 60% in recent months. Dan Portanova, managing director and portfolio manager in Irvington, N.Y., said he is a "little leery of the corporate bond market because of the size of buy-out funds, [leveraged buyouts and merger and acquisition activity]." The investor has substantially underweighted triple-B credits at 4% of the composite versus the 20% weighting of its benchmark, the Lehman Brothers Intermediate Government/Credit Index, and will continue to pare riskier credits. The index has a 50% corporate credit weighting.


Gartmore has shifted funds into Treasury and agency allocations, bringing weightings to 50% and 5%, respectively. "It's a relative value play overall. We think corporates are the worst asset class," he noted, adding "I think this is an environment where you're trying to lose less money than the next guy." While he does not find Treasuries tremendously attractive, the manager explained he does anticipate core consumer price index numbers will trend downwards over the course of the year, which would be positive for the government bond sector.

The duration of Portanova's government allocation is 3.6 years, slightly longer than that of its index. He explained in a flattening environment he wants exposure on the long end, though he does not go out farther than the 10-year range. His corporate allocation is 3.9 years, short his benchmark's 4.25 years as a result of his negative view on credit. The manager expects the Federal Reserve to raise rates 25 basis points two more times and then to potentially pause.

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