Pitcairn Trust Company will swap 5% of its overall allocation out of agencies into corporates, says Patrick Kennedy, portfolio manager with the Jenkintown, Pa.-based investment firm. Kennedy says he had already begun this trade when spreads widened in June, and that he is looking at completing the rotation if corporate spreads continue to widen by an additional 20-25 basis points.
Kennedy says an example of a recent trade is the sale of some 65Ž8 % Fannie Mae '09 (Aaa/AAA) debentures in order to buy the St.Paul Companies 8.12% notes of' 10 (A1/A+). Last Monday, St. Paul traded at $101.46, or 252 over. Kennedy says his firm also bought the Kellogg Co. 6% notes of' 06 (Baa2/BBB), which traded last Monday at $101.25, 223 over.
Kennedy manages a $100 million portfolio, which has an asset allocation of 45% corporates, 18% treasuries, 15% ABS, 13% agencies, 5% CMOs and 4% cash.
With a 5.40-year duration, the portfolio is slightly short its index, the Lehman Brothers Government Credit index, which has a duration of 5.46 years.
