Mortgage Securities Deserve a Bigger Place in Pension Portfolios, DoubleLine Says



Collateralized mortgage obligations (CMOs), which are collections of home-loan bonds, have long been a stalwart of insurers. But for other institutional investors, ownership is scant. DoubleLine Capital, the rising fixed-income power, would like to change that.

And it has some interesting research showing that CMOs dedicated to agency-guaranteed bonds, known as mortgage-backed securities (MBS), can book superior performance over time. MBS, of course, are pools of individual mortgages. Those that agencies support—Fannie Mae, Freddie Mac, and Ginnie Mae, chiefly—carry the pledge that Uncle Sam will cover any defaults.

Once-popular non-government-backed mortgage securities, which took a hit in the 2008 financial crisis, have diminished in volume. These so-called “private label” home-loan bonds dropped by half from then to now, to $1 trillion.

Author(s): Larry Light

Publication Date: 18 February 2021

Publication Site: ai-CIO