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We believe that the mortgage-backed and asset-backed securities market is inherently inefficient, and that the degree of inefficiency changes with the broader market conditions. The complexity and diversity of the instruments, combined with the different objectives and goals of the participants, tends to create persistent market inefficiencies and attractive investment opportunities.

Investment Approach

We seek to exploit market opportunities that exist within the structured product bond market, focusing on issue selection within our macro sector outlook. We believe that the mortgage-backed and asset-backed securities market is inherently inefficient, and that the degree of inefficiency changes with the broader market conditions. The complexity and diversity of the instruments, combined with the different objectives and goals of the participants, tends to create persistent market inefficiencies and attractive investment opportunities. These inefficiencies can be opportunistically exploited through an investment process that focuses on relative value within the investable universe.

Distinguishing Features

  • Deep and stable team averaging 16 years of industry experience
  • Intensive, independent proprietary research: proprietary process resulting in a deep understanding of issuer and industry dynamics
  • Portfolio managers & analysts work together on decision-making and portfolio construction, fostering a collaborative environment that allows the Team’s best investment ideas to emerge.
  • Downside risk management: Quantitative risk controls and qualitative risk assessments seek to minimize portfolio relative volatility.
  • Excellent historical long term track record

Investment Process

Develop Macro Thesis
  • Development of a macro thesis through a top-down assessment of various housing and economic metrics to provide a framework for our portfolio contstruction
Deconstruct Benchmark
  • Filter mortgage backed securities opportunity set to 300-500 holdings
Assessing Valuations
  • Analysts and portfolio managers collaborate on decision-making
Security Selection
  • Multiple prepayment models are used to examine the cash flow profile under numerous interest rate, HPA, and policy (HARP) shocks, both instantaneously and over extended time horizons
Position Sizing / Liquidity Assessment
  • Independent proprietary risk rating system and relative value analysis
Surveillance
  • Modeled within numerous industry prepayment models and stress tested under various instantaneous and horizon interest rate shock scenarios
  • Actively reviewed as valuations and economic inputs change to consider possible purchase or sales candidate

Diversification does not assure a profit or protect against loss.