“They’re moving more neutral, which means they expect agencies to perform better than what the fund’s prior thoughts were,” Todd Rosenbluth, director of mutual-fund research for S&P Capital IQ, said in the article.
Mather, who worked as a mortgage bond specialist at Goldman Sachs Group, said the Total Return Fund had cut MBS allocations in anticipation of lower prices after the Federal Reserve slowed its bond purchasing program and considered hiking interest rates.
“It is relatively unusual for us to own as little agency MBS as we have had,” Mather added. “To some extent we have reduced our underweight by buying select agency mortgages.”
The MBS pick up may have come at an opportune time as mortgage-related debt have been outperforming. According to Bank of America Merrill Lynch data, agency bonds have returned 0.22%, compared to the 0.11% for Treasuries.
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Max Chen contributed to this article.