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New England Investor Plans To Juice Up Short-Duration

A Boston-area short-duration manager is looking to extend its reach into asset-backed securities and structured products as it prepares to extend an investing strategy to a wider audience.

A Boston-area short-duration manager is looking to extend its reach into asset-backed securities and structured products as it prepares to extend an investing strategy to a wider audience. Capital Advisors Group, which manages around $5.6 billion in fixed income from Newton, Mass., has some investors in its enhanced yield strategy, but hopes to launch the strategy as a standalone investment once it raises more capital, according to Lance Pan, director of research. Pan said Capital Advisors is considering launching the strategy now because an increasing number of clients appear to be more comfortable adding risk and the manager currently has a conservative tilt.

Capital Advisors caters mostly to accounts from regional pharmaceutical and biotech companies and does not invest below investment grade. About $550 million is already invested in the enhanced-yield strategy and the manager has verbal commitments for more. Increasing the risk would entail raising the portion of triple-Bs from around 5% to 20% and up to 15% of the strategy will be in structured products, including mortgage-backeds and collateralized debt obligations, versus none for the more conservative account. In addition, asset-backeds could go up to 30%, from a current weighting of fewer than 15%. Capital Advisors will also broaden its investment guidelines to allow it to hold individual bonds with maturities up to five years for the enhanced yield strategy, according to Ben Keating, director of investment strategy.

Right now, the asset manager is focused on getting its existing clients on board with the strategies. After that, it will seek to line up new investors for the strategy.

Pan plans to hire a credit analyst to provide a focus on specific credit ratings and round out his small research group of two professionals. The analyst will report to Pan and focus on credit ratings of taxable fixed income securities. He has extended an offer to a candidate, but he declined to name the person.

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