BNP AM

The sustainable investor for a changing world

US mortgage strategy

Key features

A portfolio of high-quality mortgage– and asset-backed securities

A well-defined investment process that seeks to build a diversified portfolio with attractive yield/convexity characteristics

Managed by an experienced portfolio management team based in New York

Investment philosophy 

We believe the US agency mortgage-backed security (MBS) market exhibits inefficiencies. We seek to exploit them by focusing on security selection and the characteristics that drive prepayment differentials: refinancing, relocation, defaults etc. 

We think duration is a low-information-ratio trade, and therefore endeavour to keep duration times close to the benchmark in each case.

Risk control is also paramount: risk management and performance attribution serve as important feedback mechanisms

Investment process

Our US Mortgage strategy follows a disciplined three-step process:

  • Portfolio construction: combine top-down and bottom-up views to build a strong foundation of holdings with attractive yield/convexity profiles relative to the benchmark
  • Tactical positioning: take advantage of relative value opportunities and off-benchmark positions 
  • Security selection: scrutinise underlying collateral of MBS pools using proprietary tools

Team and resources

Our US Mortgage team is based in New York. John Carey, who has more than 28 years of industry experience, leads the team.

The team consists of portfolio managers with expertise across different sectors of the US mortgage market including collateralised mortgage obligations (CMOs), non-agency MBS and commercial mortgage-backed securities (CMBS). They benefit from access to our global trading and risk management platform, Sustainability Centre, Quantitative Research Group and Macro Research team. 

Investments are subject to market fluctuations and the risks inherent in investments in securities. The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay, the strategies described being in risk of capital loss. There is no guarantee that the performance objective will be achieved.