Thrivent Financial for Lutherans is planning to reduce its allocation to manufactured housing and increase its exposure to high-quality, liquid credit cards. Scott Lalim, portfolio manager of a $1.7 billion asset-backed portfolio in Minneapolis, says the buy-sider plans to sell 4%, or about $75 million, in manufactured housing bonds and use some of the proceeds to buy high-quality securitizations of credit card receivables. He says although manufactured housing has received a black eye as an asset class, deals from top issuers and those with a monoline guarantee have performed well, and he is thinking about selling now and putting money back to work in the sector later in the year when prices cheapen up a bit. The move would reduce the firm's exposure to MH from roughly 20.4% of its portfolio. "We're trying to get a slight underweight [to MH] so we can have some powder dry to put back into that market later in the year," Lalim says, adding, "it's not because of concerns over credit, it's just that they have done very well." He plans to sell paper from issuers such as Vanderbilt, one of the few bright spots in the MH market, which he says has tightened considerably over the last year or so, especially of late on the heels of Berkshire Hathaway's purchase of the company. The portfolio uses a customized index.
On the card side, Lalim has recently increased his allocation to 15% and plans to continue to do so by adding to the portfolio's exposure to liquid issues, such as from Citibank, J.P. Morgan Chase and Bank One. He says it's a defensive strategy, arguing that rates have gone as low as they can go and that monetary policymakers' efforts to stimulate the economy will pay off. "With a strong economy, rates will be higher, and I think they will tighten before they ease again," he says, explaining his increased allocation to liquid cards.
The remainder of the portfolio is allocated roughly 53% to home equities, 10% to autos and 5% to stranded cost securitizations.
