Hello My name is Terry Spath and
I am the Chief Investment Officer.
Thank you for joining us again,
this week for the Market
Minute where I want to talk
about something that we
haven't touched on really, which
is Asset Backed Securities (ABS).
So asset backed securities are
any sort of, just as the name
says, security that's
backed by specific assets.
So for example, mortgage
backed securities
are backed by a set of
mortgages and those cash
flows get paid out
to the investors
in those mortgage
backed securities.
And the reason I wanted
to talk about them
is because their risk
adjusted returns can really
improve a lot of portfolios.
So mortgage backed
securities and asset
backed securities have been
doing quite well recently
for a couple of reasons.
The strength of the consumer.
So those cash flows for
things like credit cards,
retail stores, have
been coming through.
And housing market's
been strong.
So that's been beneficial for
mortgage backed securities.
In addition to strong
returns, this asset class
has less volatility than
most corporate bonds
and are negatively
correlated to the S&P 500.
So by including them as part
of a diversified portfolio,
you can really improve
those risk adjusted returns.
However, I would emphasize
that active management
is crucial for investments
in asset backed securities.
They're inherently complex.
And because of that, an active
manager who can navigate this,
this asset class can
be very beneficial.
So this is an area
that we have been
adding to recently for
those risk adjusted return
benefits that we've discussed.
Thank you for
joining us this week.
And we'll see you
again next week.
