Wilmington Trust Company has been shifting its corporate holdings into higher credit quality, more-liquid names in anticipation of the traditional performance lag in corporate bond in September and October, as well as slowing foreign investment in U.S. debt. Clayton Albright, manager of $600 million in taxable fixed-income for the Wilmington, Del. firm, says he has shifted about 4% of his portfolio, or $24 million, in the last month into mostly higher-rated corporate debt that he believes will weather a drop in corporate spread performance. Albright doesn't have an explanation for the lag.
A name the firm has bought recently is chemical company Zeneca Wilmington 7% of '23 (Aa2/AA+) because it is a high quality issue in a good part of the curve. The paper was trading at $103.91 last week, up from $103 a month ago. Wilmington also bought the Safeway 6.15% notes of '06 (Baa2/BBB).
Examples of credits the firm has sold include Endesa 7.75% of '08 (Baa1/BBB+), a Chilean utility. Albright says the company sells to Argentina and Brazil, and he's not convinced that those economies are out of danger. The paper last traded above par on April 9, and has hovered between $96 and $98 since May. It was at $97.01 last week. Wilmington also sold TRW 6 5/8% notes of '04 (Baa2/BBB) due to concerns that auto industry woes will cut into the supplier's business. The paper had held up as of last week, trading at $102.45, and had maintained a 102 handle through August.
The greatest portions of the assets Albright manages are neutral to the 3.6-year Lehman Brothers intermediate index. The allocation is 50% corporates, 14% asset-backed securities, 13% U.S. agencies, 10% Treasuries, 8% mortgages and 5% cash.
