The Strong Ultra Short Term Income Fund, managed by Strong Capital Management, has slipped into the No. 1 spot for funds holding ABS, according to numbers from Thomson Financial BondWatch. By TF's tally, which measures portfolio size by par value, Strong's fund holds approximately $1.5 billion in ABS, and another $2.9 billion in MBS and CMOs.
According to portfolio manager Tom Sontag, securitized products account for nearly 70% of the fund, though the market value of the assets is less than TF's par value assessment. The fund's total market value is approximately $3.3 billion, $700 million of which is ABS. Ultra Short Term Income Fund returned 4.26% in 2001, with a five-year average of 5.82%.
"I think [the ABS market] has done pretty well, and will continue to do well from a credit standpoint," Sontag said. As for current opportunities, Sontag added, "I'm of the opinion that the FED is not raising rates, so I want to take advantage of the steep curve to capture the roll down."
The Bond Fund of America, a fund managed by Capital Research and Management Co., holds just over $1 billion in ABS for the No. 3 spot, just beneath Pacific Investment Management Co.'s Total Return Fund, of which ABS makes up a meager 6%, according to BondWatch.
New to the top five, Federated Investment Counseling's Ultra Short Term Bond Fund apparently has increased its allocation to ABS, which accounts for nearly 63% of the fund's $1.5 billion in par assets, according to BondWatch. The fund's one year return is 4.59%, with a three-average of 5.34%. Federated also appeared further down the list with its Limited Term Fund, holding just more than $400 million in ABS.
Meanwhile, Grantham, Mayo, Van Otterloo & Co.'s GMO Alpha Libor Fund, is holding $700 million in ABS, according to BondWatch, which is nearly 70% of the fund's $1 billion in par assets.
On the MBS side, Morgan Stanley's Trust Advisory Mortgage Portfolio holds a whopping $6.7 billion in mortgage-backeds and CMOs, more than 90% of the funds total assets.