Aladdin Capital Management will scale back its fixed-income holdings and allow cash to pile up in the coming months if the presidential election is close. The firm will sell assets and refrain from reinvesting, said Dale Spencer, portfolio manager at the $1.5 billion primarily high-grade corporate fund. He declined to specify both how much he anticipates scaling back and Aladdin's current cash and leverage levels. The firm is based in Stamford, Conn.
A President Bush win is perceived as being a positive for the market while a tight race or a win by Sen. John Kerry is seen as potentially negative for spreads. "It looks like the market is more friendly to Bush gaining in the polls; if it appears the Republicans are extending their lead, the market will trade favorably," he stated. Corporate bond spreads are beginning to sway with the ebbs and flows of the race (BW, 9/13).
Spencer noted the corporate bond market rallied after the political conventions and the Olympics went off without a terrorist attack. He added oil prices are another factor influencing his strategy. "We'll continue to gain comfort with the market as oil prices come down, which should have a big impact as earnings look better and consumers gain strength."
After the election, Spencer said Aladdin will put cash to work on a security-specific basis, including Nextel Communications, a credit he is currently looking at and finds interesting.
The fund does not use a benchmark to measure its sector allocations. Telecom and financials represent one of the fund's larger allocations, comprising 25% of its portfolio because of name specific-investments. Spencer noted several recent issues in telecom have been priced attractively and the firm has participated. He highlighted BellSouth Corp.'s 5 1/5% of '14s as especially appealing. "We also think Sprint Corp. continues to have good credit and we expect to see upgrades in the future with that name," he added.
