Strategies
Fixed Income
Global Securitized Strategy
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Global Securitized Strategy
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Strategies
Fixed Income
Global Securitized Strategy
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Global Securitized Strategy
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The team believes that successful investing in securitized debt requires a long-term perspective, a disciplined investment process, and a commitment to research. They believe superior long-term returns can be achieved by combining strategic portfolio-structure decisions with sensible valuation methodologies for selecting specific investments. Careful analysis of mortgage market fundamentals must be grounded in price-valuation disciplines, and these analyses must be re-examined on an ongoing basis to ensure their continued value.
Securitized product transactions are over the counter (“OTC”) and span many different time zones and geographic regions. With a new issue market and scattered secondary market, the ability to effectively transact on an idea makes a substantial difference. As experienced and informed investors the team is better equipped to assess both the historical and current risk/return profile of a security. Additionally, they emphasize the importance of knowing how to engage with the market, and where to source investment offers.
The Experience of the Firm and breadth of the team |
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The team's senior management team has an average of over 17 years of investment experience and have invested through a number of credit and prepayment cycles. They have established a structured approach to investing, which integrates research with portfolio management and trading. |
Advanced Proprietary Analytics |
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The team's proprietary models focus on three analyses: prepayment, borrower credit/default and default recovery. These data-intensive models utilize loan-level data such as up-to-date credit bureau records, and asset transaction information (by product type and to the zip code level) to assess information such as each borrower’s mark-to-market Loan to Value (LTV). Prepayment models focus not only on interest rate incentives, but also on borrower ability to refinance due to credit and eagerness to provide the necessary documents and money.Credit models use updated FICO scores to gauge the potential for borrower defaults. The recovery model focuses on asset values and potential recovery costs. |
Exceptional Structural Knowledge |
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The securitized products team’s deep knowledge of capital structures and their inherent strengths and weaknesses is a significant competitive advantage in exploiting inefficiencies in the securitized products market. The team's ability to reverse-engineer deal cash flows allows them to fully understand structures. Regardless of a deal’s structuring, its cash flows in total cannot be more than those of the underlying collateral (creation value). Utilizing this, the team can compare creation value of securities versus their market price and identify those that are fundamentally cheap. |
| 1 | Value identification |
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Our approach to identifying value starts with a strategic review of the securitized universe, including macroeconomic trends in the capital markets and where we are in the economic and business cycle. We also look at interest rate trends, the yield curve and volatility in the market. Sector themes including demand from the Government Sponsored Enterprises (GSEs), banks, overseas investors and major domestic institutions as well as relative value themes are of importance in this top down review. Next we take a look at the relative value in the universe and drill down further into the bottom up security selection process including analyzing and determining our yield curve strategy and individual security types. |
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| 2 | Implementation |
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To ensure implementation of the most appropriate collection of value ideas, senior representatives drawn from the various research teams review the broad opportunity set and establish systematic risk targets for portfolios; portfolio managers then create portfolios to attain these targets, subject to applicable guidelines and constraints, and a team of dedicated traders then executes the trades. |
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| 3 | Evaluation |
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Our evaluation phase involves the use of our proprietary risk management and attribution systems; these systems allow us to measure and manage portfolio risk on a daily basis, and help assess the impact of our key investment decisions on investment performance. |
Effective 16 December 2022, Matthew Buckley was added as Portfolio Manager on the Strategy and Neil Stone is no longer serving as Portfolio Manager on the Strategy.