Evangelical Lutheran Church in America Board of Pensions is searching for relative value in off-the-run corporate credits. Mark Haney, portfolio manager in Minneapolis, says he is looking for opportunities on the margin and is more likely to take on liquidity risk, rather than move to low-quality credits. The fund has $950 million in fixed-income assets.
As an example of the types of issues he participates in, Haney points to two recent deals that indicate he is looking at new, esoteric deals that offer attractive yields. The fund participated in the State of Israel's 5 1/8% notes of '14, which he calls good value for a single-A minus rated bond at 115 basis points over 10-year Treasuries. Also, he plans to buy the Ras Laffan joint venture deal between Mobil Oil and Qatar Petroleum which, at north of 100 basis points over Treasuries, is also attractively priced.
Haney says he does not focus on any particular sectors and instead prefers to keep a diverse mix of corporate holdings. Corporates now account for about 30%, or neutral the firm's benchmark, and any additions will maintain this level, but probably will not change it. He says there is risk for slightly wider spreads and wants to stay defensive by remaining neutral to risk characteristics and react to events as they play out.
Overall, the fund is on top of its customized benchmark, which is a re-weighting of the Citigroup Broad Investment Grade Index. The fund's duration is currently 4.44 years and the remaining allocations are 40% to mortgages, 5% to asset-backeds and 25% to Treasuries and agencies.