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Friends Ivory Buys New Issuance

Friends Ivory & Sime has bought £100 million of new issuance in the past month, and will continue to add newly minted paper to its £7.5 billion credit portfolio. London-based Etienne Gorgeon, a portfolio manager, says he is looking at the upcoming £825 million Meadowhall issue, a commercial mortgage asset-backed deal originated by British Land. He is considering the deal because of its size, and because he like ABS deals as a diversification tool. Over the past month, Gorgeon has added Tyco International's 61Ž2% of '11, HBOS' undated 6.461%, CGNU's 6.125% of '36, British American Tobacco's 4.875% of '09 and Lafarge's 6.375% of '07. He picked up these bonds because new issuance is coming at attractive spreads and he is positive on these credits.

Gorgeon says the firm hasn't been selling credits, but may begin to do some profit taking. "The market is still bullish, but we haven't been selling and we should be," he says. Specifically, once British Airports Authority tightens a little more, the firm will sell it. "We're cautious on the credit, but it has the potential to tighten a little more," he says. The firm uses several fixed-income benchmarks including Merrill Lynch's long corporate index, Barclays corporate broad and HSBC all fixed-income market. The portfolio invests solely in sterling-denominated corporate credits.

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