BNY Asset Management is looking to buy up to $250 million in triple-B corporate names and will finance the move by selling higher-rated credits. Margo Cook, portfolio manager of a $5 billion fund, says the firm is looking down the credit spectrum in search for higher yield and plans to move out of higher-rated financials and into names that react well with a growing economy. BNY is looking to add telecom, utility and manufacturing names, since these sectors tend to benefit from an improving economy. Cook declined to name specific issuers she might consider adding.
Cook says it is an opportune time to take on more risk because spreads on triple-B bonds are attractive relative to levels on double-A and single-A credits, although she did not quantify the difference. The firm is considering moving to an overweight position in triple-Bs in the next four to six weeks. The bonds currently account for 11% of the fund, or neutral the Lehman Brothers Aggregate Bond Index, and Cook says she may go overweight by raising it to 16%. She is looking for buying opportunities from spread widening, although she did not specify how much widening would need to occur for her to be a buyer.
The increase to triple-Bs would not affect the fund's overall exposure to corporates, which, at 31%, is already overweight compared to the Lehman index. Another 39% is in mortgages, which is neutral. The remainder of the portfolio is comprised of Treasuries (14%), agencies (9%) and asset-backeds (7%). With a duration of 4.15 years, the fund is currently 7% short its benchmark.