The Springfield, Mo.-based firm, with $1.1 billion in assets under management, leans toward investment-grade bonds, though in certain environments builds in a portion of high yield. Last winter, the firm had not been buying a lot of corporates (CIN, 2/20). But in June/July when rates peaked, the firm started buying more bullet issues and more corporate bonds because the firm thought the Federal Reserve was done, or close to being done, with raising rates. It wanted to lock in some yield, and increased its purchase of corporates at that time.
He said the firm does not have a specific industry it focuses on, but BKD sold the vast majority of its auto holdings a few years ago and does not plan on re-entering that space any time soon. Layman's primary benchmark is Lehman Brothers Aggregate Bond index.
Layman said the firm is still somewhat reserved in its expectations for total bond returns. "Our expectations are fairly modest for bond returns and when you look at some of the riskier areas that often times provide more return potential, spreads are still fairly narrow," he said. "We think total bond returns are going to be somewhat limited to coupon rates. We don't think there is a huge excess return possibility in that area over the next year or so."