Portfolio Manager Perspectives

Jeff Benjamin

Time's right for riskier global bonds, says Hartford's Portera

High yield and emerging markets debt looking attractive

May 6, 2010 @ 10:06 am

By Jeff Benjamin

A strengthening global economy makes now the perfect time to load up on riskier fixed-income investments, according to Joe Portera, manager of the $374 million Hartford Strategic Income Fund Ticker:(HSNAX).

“Global capital spending is growing at an incredible rate,” he said. “The global economy is booming, led by the emerging markets, and all anecdotal evidence is pointing toward robust growth.”

While Mr. Portera acknowledged the uncertainty surrounding the sovereign debt in Greece needs to be closely monitored, he has tilted the global fixed-income fund toward high yield and emerging markets. The fund has a 40% weighting in high yield, which compares to 33% a year ago. The emerging-markets exposure has grown to 10%, from 6% a year ago.

Investment-grade debt, meanwhile, has been trimmed to 20%, from 30% when he took over the fund in August 2009.

Much of Mr. Portera's current strategy is also built around an outlook for improving U.S. economic growth and low levels of inflation.

“The U.S. economy looks set to grow by 4% this year, and at the same time, the Fed has a lot of room to maneuver,” he said. “Right now this is the lowest inflation rate and the highest unemployment rate we've ever seen one year into an economic expansion, so our conclusion is that the Fed will keep rates lower.”

The “benign mode” of the Federal Reserve Board is the main reason Mr. Portera likes risk. “Good growth is usually a good recipe for riskier assets,” he said.

When interest rates do start to rise, Mr. Portera said he plans to shift more assets into floating-rate bank loans.

“We don't think inflation will be a problem this year, and there's no impetus for the Fed to raise rates,” he said. “In 2011 we think the economy will continue to hum along and at that time we might take some credit risk off the table.”

Portfolio Manager Perspectives are regular interviews with some of the most respected and influential fund managers in the investment industry. For more information, please visit InvestmentNews.com/pmperspectives.

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