07 Oct White Paper – Securitised Credit
Voya Investment Management
The global credit crisis left opportunities for investment in securitised credit, as markets have remained inefficient and dislocated. Regulatory capital pressures and other directives levied on domestic and European financial institutions have prompted sales of large pools of non-agency RMBS and CMBS — sales that have periodically distorted market technicals and temporarily impaired liquidity. On balance, these factors have conspired to leave securitised products offering significant yield premiums versus other fixed income markets.
When weighing these yield premiums against today’s fundamental backdrop, opportunities become apparent. As the U.S. economy has recovered, liquidity and investor demand for securitised credit have followed suit. In particular, the ongoing recovery in real estate directly supports the performance of MBS. The sizeable and resilient recovery in the U.S. labor market has directly supported consumers’ fiscal strength, which bodes well for ABS. Direct access to these risks is uniquely available through investment in securitised credit markets. Moreover, leveraged exposure to specific fundamental risks through securitisation technology allows portfolios with a particularly focused combination of risks to be constructed