Barry's investments have little credit risk, as they typically involve Ginnie Mae's and other securities with AAA ratings. The one risk that investors in mortgage-backed securities can do little to hedge out is spread risk. Changes in spreads don't correlate to specific events, and thus are difficult to hedge against, though usually spreads don't widen or narrow very much unless they are related to an extraneous event. The risks, then, with mortgage-backed securities are relatively manageable, translating into stable returns. Especially when hedges are applied, these returns are stable enough to make leveraging a viable tool for enhancing returns.
Mortgage securities are no doubt complex.
But they should be seriously considered by fixed-income investors who seek steady returns that can be far superior to standard bonds. Magnum Global Investments Ltd. All Rights Reserved. Inc. All Rights Reserved. This site contains information about funds and other investment products and services which are not intended for or available to certain investors in certain jurisdictions. In addition, the funds and services that are available for U.S. persons have not been registered with the Securities and Exchange Commission, and as a result, such investment products are only available to certain accredited investors who have been pre-qualified by Magnum.