Sage Advisory Services, a manager of $2.8 billion in taxable fixed income, has created its first dedicated high-yield corporate bond fund, according to Edward Sullivan, v.p. and director of research. The Austin, Tex.,-based manager currently runs about $300 million in high-yield money as part of a broader portfolio, and has decided to strip out the high-yield portion and turn it into a separate account to attract new funds. Sage is committing to the junk-bond arena now, as it believes high-yield debt will outperform in the coming months as the economy picks up, he said. "As the economy picks up we will see a high-yield rally," Sullivan predicted, adding, "it's a good time to be entering the market." The manager sent a letter to shareholders a couple days ago informing them of the new product. It will seek to raise as much new cash as possible.
Although the dedicated account is new, Sage is no stranger to the junk bond world. Its high-yield bucket outperformed the high-yield indices maintained by Merrill Lynch, Citigroup and Lehman Brothers by an average of 600 basis points over the past two years, according to Sage's Sullivan. "We've been quite successful during a tumultuous time and think there's a lot of opportunity as the economy picks up," Sullivan said. Specifically, he said Sage will focus on the higher end of the junk universe, and will not buy unrated bonds or those rated below single-B.