While many corporate portfolios are in a holding pattern lately, a few corporate investment managers have been making tweaks. According to members of The NeuGroup’s Treasury Investment Managers’ Peer Group (TIMPG), those adjustments have centered mostly on increasing duration and offshore credit risk and also expanding asset classes onshore.
One member of the TIMPG has been getting a bit more aggressive, moving away from government debt and toward more toward corporate and financial debt with longer durations. This member also noted that this included maturities well past the potential fiscal cliff, which avoids the possibility of facing a supply shortage. The member also revealed that his team was in the beginnings of a project to get set up for executing repos. They’ve been establishing their repo contract with various dealers, although none are yet completed. Unfortunately, a narrow field of counterparties has hampered the effort. That’s because the company prefers to deal only with banks who work with an agent bank that’s in its credit group.
Another member of the group was looking into asset backed maturities off shore. However she was getting push-back from the tax department, which is averse to the risk that in a default the company could end up technically owning real estate in a foreign country. This could alter the company’s tax status in that country. Other members were getting similar push-back although others have had no issue with off-shore ABS.
Members also discussed bank loans, which were getting green lighted more often than not. One member noted that now is a good time to buy into bank loans as their rates are higher than comparable high-yield risk. One member agreed, stating his company had just set up two managers to invest in bank loans and high-yield debt. This was affirmed by another member who noted that he has given his high-yield managers the flexibility to buy bank loans.
It’s uncertain whether these modest tweaks in company portfolios are an indication that things are beginning to thaw or just show that companies are still struggling to find return in a zero interest rate environment.