Columbia Loads Up On Low-Quality Paper

Columbia Management Group is overweight low-quality credits, said Tom LaPointe and Kevin Cronk, portfolio managers of a $3.5 billion high-yield fund in Boston. The fund's growth lies in the top 17th percentile of high-yield funds covered by Lipper and its gross return is 14.8%. "We've added triple-C investments at the expense of the more Treasury sensitive double-Bs," LaPointe explained. Cronk said the fund is avoiding higher-quality, lower-coupon and higher-duration paper, and has also added some equity, convertible bonds, floating-rate bonds and preferred stock at the margins. Columbia Management likes the utility, cellular and cable sectors, noted LaPointe, adding that U.S. Unwired and Charter Communications account for two of its biggest holdings. "We've also recently participated in new deals for Kabel Deutschland, Tenet Healthcare and the Goodyear convertible--our modeling showed the Goodyear convert was undervalued," stated Cronk. The fund will put new cash into its existing holdings and will selectively look for new opportunities, they said.

The eight person group uses a credit-intensive process to invest and the J.P. Morgan High-Yield Index and Credit Suisse First Boston High-Yield Index as its benchmarks. The fund's duration is between 3.5 and 4.5 years, said LaPointe.