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Giroux: First of all, I would say, if you think about the fixed-income sleeve of the CAF, we've never really been Barclays Agg kind of index. I know a lot of our peers are. We historically haven't owned a lot of Treasuries, we haven't owned a lot of mortgage-backed securities, and really—and many investment-grade corporates, we really don't own a lot of that. So, coming to this year, the largest portion of our fixed-income portfolio is floating-rate bank debt that is basically flattish on the year despite the equity carnage and the fixed-income carnage. I've never been a big believer that you have to have that Barclays Agg be your fixed-income allocation. We go where we think the best risk/reward is. We think bank debt is really, really attractive and high quality, high yield is also quite attractive on a long-term basis.
Now, having said that, though, to your point, rates have risen dramatically. So, we have started buying Treasuries. This would be the third time in the last decade we started buying Treasuries. We bought Treasuries in '18; we bought Treasuries in '13; and we started buying Treasuries this year. Treasuries today are about 8% of our portfolio, and our cash level has gone down, both by adding the equities as well as funding those Treasury purchases. We're going to take the other side of the argument. We actually believe rates, if you think about it, a three- to five-year horizon are more likely to be lower than higher. And if you have that view and now you're earning 3% on Treasuries, on five-year Treasuries, it actually makes sense to own a little bit Treasuries, which we do now.
Blue: Great. You mentioned coming into the year optimistic on floating-rate debt. Did you fund any of your Treasury purchases through that allocation? Or do you still have an allocation to floaters in that fixed-income portfolio?
Giroux: Yeah, we haven't sold any of our floating-rate debt at all. Essentially, our cash position, I believe, coming into the year was high single digits, low double digits. And essentially, that's going down to 3% to 4% today. And again, that's funded the Treasury purchases as well as increasing our equity allocation to take advantage of the dislocation we've seen in the equity market year-to-date.
His largest holding is now Microsoft. Likes Google a lot. Buying some intermediate or longer dated treasuries as he doesn’t see longer term inflation topping 3% - about what treasuries yield. I happen to agree with him that energy is risky. That puts both of us at odds with most of the investment universe right now.
Glad you have an investment plan figured out / charted. I do not. A lot of things appear reasonably priced. But I don’t have an infinite amount of cash to invest. Plus - no matter how cheap things look, they can always get even cheaper. Momentum driven markets work on both the upside and downside.