Avoiding the Crowds: Finding Opportunities in Private Structured Credit

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Avoiding the Crowds: Finding Opportunities in Private Structured Credit

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Scott Waterstredt, CFA Poorvi Dholakia Paul Carroll, CFA Allison Hock
MAR 25, 2021

SUMMARY

2020 is still closely in the rear-view mirror and it feels somewhat cliché to note what a wild ride it was for markets. The pandemic fueled sell-off and financing scramble in the first half of the year created significant challenges and opportunities for investors, particularly during the “closure” of the broadly syndicated, asset-backed new issue market. We saw attractive private structured credit (PSC) investments in consumer loans, RMBS and CMBS. However, the spreads and opportunities we saw at that unprecedented time did not endure.

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Private Structured Credit

Here we are - back to where we started 2020 with low rates, tight spreads, and warnings from some that asset prices across sectors may be overheated. What are fixed-income investors to do now? For MIM’s PSC strategy, it’s back to the basics – seeking to avoid crowded asset sectors and find deals that fall through the cracks in the market. This means trying to identify higher-yield, investment grade opportunities that don’t fit neatly into the traditional asset-backed securities market or private securities market and work with borrowers to find financing solutions for these non-conforming sectors.