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Hancock Bets On A Weak Dollar


John Hancock Advisors is putting cash to work in foreign bonds to take advantage of a weak dollar.

John Hancock Advisors is putting cash to work in foreign bonds to take advantage of a weak dollar. Fred Cavanaugh, senior v.p. and portfolio manager of the $1.5 billion Strategic Income Fund, plans to maintain the fund's 65% exposure to foreign markets by adding new bonds as older ones mature. He expects foreign debt will outperform on a dollar basis given his view that the greenback is headed for a prolonged downturn. Cavanaugh says his main focus is picking up yield in the foreign markets through factors such as currency appreciation. "We've really tied our strategy to a declining dollar," he saying, adding he sees a continuing devaluation of the dollar for another year or two or possibly longer. The fund holds Canadian, European and Asian bonds. The overall portfolio consists of 46% high-quality sovereigns and 19% emerging markets. Half of the fund is in non-dollar assets. Cavanaugh declined to discuss specific credits he may buy or sell.

In dollar assets, the fund holds 18% of its portfolio in high yield corporate bonds, 14% in Treasuries and 3% in cash and equity. Cavanaugh notes the high-yield allocations remain diverse, listing leisure, transportation, and utilities as some of the sectors in which he invests. He declined to mention any specific company names. Cavanaugh states that high-yield spreads are currently pretty tight and he doesn't see much value left there, although he doesn't plan to change the existing allocation. "We think that high yield had a fabulous year last year," he notes, adding that he expects spread widening as this year continues. He says he is watching the U.S. economy very closely and that if it shows some strength in the coming months he might be attracted to the high yield market more quickly as spreads would likely tighten further. He'll also look at possibly adding junk bonds if high-yield spreads widen and create a buying opportunity. Cavanaugh gauges the fund's performance against the Lipper Multi-Sector Income Fund. The firm manages more than $10 billion in fixed income.

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