Strategies/Fixed Income Strategies
MORTGAGE-BACKED SECURITIES - Philosophy
We believe the Mortgage-Backed Securities sector is a high quality asset class that provides excellent long-term, risk-adjusted returns. Value-added returns can be achieved through active subsector rotation and security selection based on historical relationships. Our approach is to add value by:
Effectively using quantitative analytics to determine relative value
- Option-adjusted analysis (Citigroup Yield Book)
- Empirical regression for historical price relationships
- Cash flow analysis
Employing housing and loan market analysis to assess:
- Credit fundamentals
- Borrower options (conventional, affordability, ARM)
- Impact on prepayment models
Managing risks
- Best execution
- Key rate duration
- Extensive credit and structure analysis
- Liquidity