The replacement manager for James Foster says there are tactical opportunities to be had following the huge markdown in the stock prices of US insurers in the wake of Spitzer’s action.Luis says the insurance industry’s fundamentals are still fairly strong for insurers, despite nervous investors selling their holdings. She adds there is still some relative value in the sector. Consequently, she bought Munich Re, which she says has suffered as a result of the recent sell-off despite having only a modest US exposure. She adds: “The New York attorney general’s action against Marsh & McLennan should not really affect European insurers with little to no operations in the US. Even so, being hit with fines would not cause their bonds’ rating to downgrade.” As a result, she views any spread widening on this headline risk as an opportunity to increase the insurance holdings in the portfolio. Luis took over the fund officially three weeks ago following Foster’s decision not to return from his sabbatical. She says the fund has been overweight in the insurance sector for the past few months anyway, but she is using the Spitzer report to add to it further. Since taking over full-time, the only major changes made to the portfolio have been stock-specific. Luis says she has reduced the high-risk portion of the fund’s high-yield portfolio, which currently accounts for 56% of the fund’s overall assets: “The high-risk names have performed well recently and they continue to, so we felt it was time to take some profits.” She has instead recycled the money into more short-dated names, which she says are less risky if spreads widen. She is also gradually lowering the duration of the investment-grade bonds she owns, and is heavily invested in the BBB area.