Austin, Texas-based Sage Advisory Services is looking to the secondary market for investment value. Mark MacQueen, co-founder and portfolio manager of the $3.6 billion firm, said the reason he prefers to look at the secondary market is that he likes to pick his spots. "I prefer to buy something when I think that the time is right to buy it, not when someone prices it so it is convenient for me to buy it," he explained.
MacQueen also noted that investing in the secondary market is the most effective investment strategy for someone running a smaller firm. "Larger fund managers have no choice but to buy in extremely large quantities, such as $50 million at a time. By looking to the secondary market, I'm able to buy in ones or two's and give my clients what they actually want," commented MacQueen "I have much more flexibility than a lot of the larger firms out there."
All of MacQueen's portfolios utilize the same strategy and he rarely, if ever, moves money between them. "I try to keep consistency within each product sector so that they can provide consistency and I can avoid dispersion," he added. MacQueen is currently looking at mortgage-backed securities and corporates. "I personally think that there is a lot of value there. I'm trying to focus in on CMOs and 'AAA' rated bonds, I like to keep my credit risk as low as possible," he noted.
His intermediate portfolio, his largest, has an allocation of 38 % corporates, 5% intermediate mortgage-backed securities, 7% asset backeds 35% agencies, 15% Treasuries [3/4 of which are in TIPS], and the remaining balance in cash.
MacQueen utilizes Lehman Brothers Government Corporate Intermediate Index. His duration is 3.6 years.