Applying the “three lines of defense” in multi-asset income
Facing volatile markets and lower rates, how can investors seek yield while managing risk?
Securitised debt is one of the key components of the fixed income market. But the subprime mortgage crisis, which started in 2007 and triggered the Global Financial Crisis, gave securitisation a bad name.
A decade on, the securitisation market has regained much ground. We see opportunities and are using our expertise to harvest yield and manage risk. It’s not as devastating after all.
Weak loan underwriting process
Enhanced loan underwriting standards
US borrowers struggled to repay mortgage
US household leverage declines
Structural flaws in the market
New regulatory frameworks
Securitised debt4 in the current context of fixed income investing
An unconstrained strategy invests opportunistically across sectors and geographies in the fixed income universe, allowing investors to go beyond traditional bonds in their search for yield. For example:
Overall, it is worthwhile for investors to be mindful of the risks before investing in the securitised debt market. Nonetheless, investment risks could be managed through diversification with the help of an active manager.