Due to weaker than expected recent economic numbers,Groupama Asset Management has begun to swap 15%, or $45 million, of its portfolio out of corporate bonds into Treasuries and will pursue this strategy over the next two months, says portfolio manager Dan Portanova.
The firm will buy off-the-run Treasuries with maturities exceeding five-years. As an illustration, Portanova says the firm sold the American General Financial 6.25% notes of '02 (A2/A+), which was trading at 21 basis points over Treasuries last Monday. In exchange, it bought the off-the-run 10-year Treasury issue.
The portfolio's biggest corporate positions are found in the industrial and financial sectors. The firm holds names such as Alcoa Inc. (A1/A+), Dow Chemicals (A1/A), Wells Fargo & Co. (Aa2/A+), Morgan Stanley (Aa3/AA-) and Merrill Lynch (Aa3/AA-) because they will benefit from an anticipated recovery early next year, or will perform well in a lower interest rate environment. Portanova declined to say if it plans to add to its existing holdings of those companies.
Groupama, located in New York, has $300 million in taxable fixed-income. The asset allocation is 65% corporates, 25% Treasuries, 8% MBS and 2% ABS. The fund's duration is 3.60-years, slightly shorter than its benchmark, the Lehman Brothers Intermediate Government credit index, which has a duration of 3.65-years.
