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High-Grade Manager Eyes Autos, Industrials

Winterthur Investment Management is focusing on making industry sector calls, said Reto Koller, cio of $2.5 billion in investment-grade fixed-income in New York.

Winterthur Investment Management is focusing on making industry sector calls, said Reto Koller, cio of $2.5 billion in investment-grade fixed-income in New York. The fund is looking to put new cash to work in credits from the auto and industrial sectors. "Nothing is wildly cheap on a per-name basis right now. I couldn't put my finger on one particular name. That game is over and it's more of a sector play," he stated, adding he is looking to be well-diversified among different names and industries. Koller noted he favors cyclical sectors such as autos and industrials.

The fund is underweight food, pharmaceuticals and the whole financial sector. "We don't like the consumer finance and banking areas because of the tightening cycle, with increasing interest rates, which puts pressure on bank margins," he said. Koller added he has no real geopolitical concerns aside from how the price of oil will be affected, which he explained could derail the drive in economic growth and lead to higher inflation.

Winterthur invests in investment-grade corporates, Treasuries and agencies. It uses the Salomon Brothers Government Agency Credit Index and is overweight corporates by 10% and underweight Treasuries and agencies by 5% each. Koller noted that the fund likes corporates because of the higher-yield and sees value for the foreseeable future and expects spreads to tighten. The fund's duration is 10% shorter than its benchmark due to the expected increase in interest rates. Koller will put new cash to work in existing allocations.

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