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Long term experience managing securitized assets in traditional and nontraditional mandates.
The Securitized strategy utilizes a disciplined process which combines a rigorous fundamental credit value approach for non-agency securitized products and a bottom-up quantitative relative value approach for agency securitized products. We believe that an active industry/sector process is helpful in adding incremental return and managing risks over a medium term investment horizon.
For credit sensitive securitized products, Stone Harbor’s approach combines top-down analysis to determine sector weightings and a bottom-up analysis for security selection. When determining sector weightings, our team considers macroeconomic outlook, industry outlook, and fundamental and technical factors. The security selection process includes a review of the issuer’s collateral, deal structure, and rating process, as well as an originator/issuer/servicer analysis and an analytical stress test. For agency securitized products we utilize sophisticated prepayment and option-adjusted spread (OAS) models and examine historical price/spread relationships to determine relative value across fixed and floating rate agency securities.
In order to manage risk, we conduct ongoing forecasting and monitoring of credit outcomes, which includes daily review of ratings, marks and written commentary and monthly review of third party data reports. Additionally, the team monitors bond/deal performance, evaluates break-even constant default rates (CDR), loss rates and coverage ratios. The team then conducts stress tests and ranks bonds, creating a watch list based on loss coverage, CDRs and/or rating changes.
We offer a flexible range of options within our Securitized strategy. Portfolios can be dedicated Securitized portfolios or a component of broader Investment Grade or Multi-Sector Credit strategies.
Utilizing a disciplined process which combines a rigorous fundamental credit value approach for non-agency securitized products and a bottom-up quantitative relative value approach for agency securitized products, we seek to:
- Identify misvaluations based upon expected industry/sector credit losses and historical valuation
- Add incremental return and manage risks over a medium term investment horizon
- Non-Agency securities such as, ABS, CMBS, RMBS
- Agency securities such as CMBS, RMBS
Strategy Inception Date:
- April 2007 as a standalone track record but investing in securitized assets as part of mandates since 1993