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Portfolio > Alternative Investments > Hedge Funds

Securitized credits funds maintain upward momentum

By Warren S. Hersch

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Securitized credit funds were up 3.10 percent for the first two months of 2013 and 20.64 percent in fiscal year 2012, according to new research.

eVestment discloses this finding in an April 2013 report on securitized credit. The report draws upon eVestment’s research database of 179 hedge funds, which invest primarily in the securitized credit markets.

Securitized credit products include asset and mortgage backed securities (ABS and MBS) and sub-classifications for residential and commercial real estate mortgage products (RMBS and CMBS). The report also tracks exposure to derivative securities such as collateralized mortgage, debt and loan obligations (CMO, CDO and CLO).

Among securitized credit strategies, those that operate predominantly in the ABS markets showed the best year-to-date performance, up 5.08 percent, the report states.

Agency-only MBS funds continue to underperform against nonagency-only MBS funds. Agency MBS strategies were up 0.42 percent year-to-date, versus 3.27 percent for nonagency strategies.

eVestment estimates total hedge fund assets investing in securitized credit markets reached $139.8 billion at the end of February 2013, $86.5 billion of which is focused primarily on mortgage related securities.

Mortgage focused-strategies took in an estimated $4.36 billion from net investor flows in 2012, and an additional $3.2 billion in the first two months of 2012, bringing estimated AUM targeting mortgage securities to $86.5 billion.

“2013 inflows for MBS funds were due to a surge of investment in February as the group had nearly $1 billion of outflows in January following slight outflows in December 2012,” the report states. “Targeted ABS (ex-MBS), and broad securitized credit funds had inflows of USD $4.1 billion in 2012, and have seen more consistent flows in the last three months than their dedicated MBS peers.

“Flows for 2013 appear to be favoring the better performers from 2012, but the point is somewhat absurd, as funds with outflows in 2013 still managed to return an average of 17.2 percent in 2012,” the report adds.

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