We offer a pure-play, bottom up approach to exploit inefficiencies in the US mortgage-backed securities market.

Our US mortgage strategies are managed by our New York-based Structured Securities team.  We have an experienced and dedicated mortgage specialist team which utilises a well-defined mortgage-backed securities investment approach where issue selection is the primary alpha tool. We have been active in the US mortgage sector since the 1980s.

EUR 6.7 bn

(USD 7.8 bn)

assets under management

Track record since

1994

6

experienced portfolio managers

19 years

average investment experience

Investment Philosophy and Process

Inefficiencies exist across the US mortgage market, and we aim to exploit them by concentrating on bottom-up security selection. Our ultimate aim is to build well-diversified portfolios with attractive yield and convexity characteristics. Risk control is paramount in our philosophy, and both risk management and performance attribution act as important feedback mechanisms in our process.

Our investment process focuses on analysis of a number of bottom-up factors that drive prepayment differentials: loan size, region, originator, vintage, credit score, loan-to-value ratio, purchase vs. refinance, and dispersion. We take tactical positions when we find attractive relative-value opportunities and look for opportunities in bonds that may be trading at an attractive valuation due to a lack of sponsorship. We closely match our portfolios’ duration to those of their benchmarks, choosing instead to implement our views on the direction of interest rates via sector allocation and security selection.

We conduct in-depth risk management, assessing the marginal impact of each holding on our portfolios’ overall interest rate risk, prepayment risk, basis risk, convexity risk and volatility risk relative to their benchmark.

In addition to the strategies listed below, our Structured Securities team has a long history of creating customised solutions to meet the objectives of a broad range of clients.

  • Conservative Mortgage

    Our conservative mortgage strategy invests primarily in agency mortgage-backed securities that are comparable in credit quality to US Treasuries. The strategy is actively managed and benchmarked against the Bloomberg Barclays US Mortgage Index, or similar. The strategy has a 25-year track record.

    The strategy aims to outperform the benchmark over a three-year period within an expected tracking error range of 50-75 basis points per year over a full business cycle. We ensure that market, liquidity and credit risks are prudently diversified.

    • A conservatively managed, high-quality US mortgage strategy.
    • “Pure-play” bottom-up approach to exploit inefficiencies in the US MBS market.
    • Sophisticated risk management to diversify risks and limit drawdown potential.
    • Well-resourced investment team averaging 19 years of experience in MBS.
  • Unconstrained Mortgage

    Our unconstrained mortgage strategy invests primarily in agency mortgage-backed securities that are comparable in credit quality to US Treasuries. It can also make opportunistic allocations to non-agency MBS, ABS and CMBS. The strategy is actively managed and benchmarked against the Bloomberg Barclays US Mortgage Index, or similar. It has a 23-year track record.

    The strategy aims to outperform the benchmark over a three-year period within an expected tracking error of 100-150 basis points per year over a full market cycle. We ensure that market, liquidity and credit risks are prudently diversified.

    • A high-quality US mortgage strategy that can take opportunistic exposure to securities backed by assets not related to mortgages.
    • Can use a limited degree of leverage to boost performance potential.
    • “Pure-play” bottom-up approach to exploit inefficiencies in the US MBS market.
    • Sophisticated risk management to diversify risks and limit drawdown potential.
    • Well-resourced investment team averaging 19 years of experience in MBS.
  • Mortgage Alpha

    Our mortgage alpha strategy uses an absolute return approach with minimal duration risk and invests primarily in agency mortgage-backed securities that are comparable in credit quality to US Treasuries. It can also make opportunistic allocations to non-agency MBS, ABS and CMBS [when permitted by client guidelines. The strategy is actively managed and aims to outperform 3M LIBOR by 350-500 basis points. It has a 13-year track record.

    The strategy aims to outperform 3M LIBOR by 300–500 basis points per year over a full market cycle. We ensure that market, liquidity and credit risks are prudently diversified.

    • High-quality mortgage absolute return strategy that minimises exposure to mortgage market beta
    • Minimal duration exposure
    • Sophisticated risk management aiming to diversify risks and reduce drawdown potential
    • Well-resourced team averaging 19 years of experience in MBS
  • Mortgage LIBOR

    Our mortgage LIBOR strategy aims to provide exposure to the attractive spreads offered by US mortgage-backed securities but with very low sensitivity to changes in interest rates.  It invests in a wide range of high-quality low duration US structured securities. The strategy is actively managed with the aim of outperforming three-month LIBOR, and has a 11-year track record. We ensure that the market, liquidity and credit risks the strategy is exposed to are prudently diversified.

    • High-quality mortgage absolute return strategy that minimises exposure to mortgage market beta
    • Minimal duration exposure
    • Sophisticated risk management aiming to diversify risks and reduce drawdown potential
    • Well-resourced team averaging 19 years of experience in MBS