Jeff Layman, director of investment services at BKD Wealth Advisors, a Missouri-based firm with more than $1 billion in assets under management, is shying away from corporates and is looking to shorter agencies in an attempt to lower his duration. Layman has been enacting his strategy over the last several months as the short end of the yield curve has risen creating a flat curve environment. "In the current environment with the Federal Reserve [rate] likely heading towards 4.75% in March and maybe 5% after that, we just haven't seen the need to utilize corporates as much; the spread is just not as good as other investments," he noted.
Although Layman does admit to looking at corporates that may hold value every once in a while, he said that the majority of his recent focus has been on callable agencies. "We have really been looking into short agencies over the last few months as we feel that that gives us much better spread than anything else out there right now given the environment," he said. Layman also notes that being locked into shorter term investments aids in his goal to lower his duration. "We also have looked into some secondary market [certificates of deposit], typically in the six-12 month range," Layman added. He explained that the primary strategy he has followed over the last few months, and foresees continuing, is one of finding the best value in a deal without sacrificing any yield.
Layman's benchmark is the Lehman Brothers Aggregate Bond Index. His duration is currently three-and-a-half to four years.