New York Firm Looks To Stay Short
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Trevor, Stewart, Burton & Jacobsen Inc. is looking to buy short-term Treasuries and agencies to keep an underweight duration relative to its benchmarks, on the view that short-term interest rates are heading higher. Liz Miller, principal and portfolio manager of $555 million in fixed income, says the New York-based investor is reinvesting in short maturity paper, primarily in government-backed Treasuries and agencies. "We are buying mostly five-year and under paper," she says, explaining the firm wants to keep itself invested in liquid instruments "to better react as we see the market begin to return." Trevor Stewart runs pension fund and insurance money accounts with an average duration in the two- to three-year range, mainly against the Lehman Brothers aggregate bond index, which has a duration above four years.
Miller says the firm focuses on high-quality paper, with about 90% in government securities and the remainder in mortgage-backeds and corporates, because the bond market's extended rally this year has led to premium prices. "We think the risk of capital loss is greater than the yield we get from taking these on," she says of spread product. Although other managers may think lower-rated bonds do still offer value, Miller says Trevor Stewart prefers to stay in top-tier securities and these remain expensive. "The spreads for taking on the risk in higher-quality names are not worth it," she reasons.