Optimize Structured Finance With More Than Just A Core Allocation

2017

When a portfolio manager considers adding structured finance to their fixed income portfolio, they may point to an existing “core” or “core-plus” allocation, which they believe provides adequate exposure to the securitized fixed income marketplace. However, our research demonstrates that a typical core or core-plus strategy has on average 64% of its structured finance allocation dedicated to Agency RMBS.1 Thus, investors may not be optimizing their structured finance allocation (i.e. investing in a standalone structured finance strategy beyond Agency RMBS) to provide enhanced income, diversification or duration. We believe a dedicated or carve-out structured finance portfolio can be a valuable complement to a core or core-plus strategy; and that investing with an established manager who has deep structured finance experience, access to both core and esoteric securitized opportunities, and is a nimble, relative value investor, can help optimize this structured finance allocation.

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