Advisors are finding it increasingly difficult to rely on their traditional fixed income portfolios to fill the dual role of generating income and providing real portfolio diversification. Focusing only on U.S. Treasuries and corporates means that advisors are missing a huge part of the bond market — the $12 trillion market for securitized assets.
In the upcoming webcast, Securitized Assets for Income and Diversification, Manulife Investment Management’s client portfolio manager Lee Giunta and portfolio manager of securitized assets David A. Bees, along with Chad Bucur, ETF specialist at John Hancock Investment Management, will explore how mortgage-backed and other securitized assets can complement traditional allocations.
Specifically, the recently launched John Hancock Mortgage-Backed Securities ETF (JHMB), which is sub-advised by Manulife Investment Management (US) LLC, a John Hancock Investment Management’s affiliated asset manager, can help fixed income investors access the mortgage-backed securities space.
The John Hancock Mortgage-Backed Securities ETF is actively managed and seeks a high level of current income while seeking to outperform the benchmark over a market cycle. Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in mortgage-backed securities. The fund may invest in mortgage-related securities issued or guaranteed by U.S. governmental entities and privately issued mortgage-related securities. These may include residential mortgage-backed securities, commercial mortgage-backed securities, and to-be-announced mortgage contracts, and may be rated investment-grade or below.
“Actively managed ETFs that invest in mortgage-backed securities (MBS) can complement core fixed-income portfolios with traditional exposure to U.S. Treasuries and investment-grade corporate debt. Securitized assets cover a diverse group of subsectors offering income and diversification, but are often overlooked by investors,” according to John Hancock Investment Management.
MBS and securitized assets are fixed income securities backed by various cash flow-producing assets. Issuers of securitized products pool these assets together and sell debt to investors that is collateralized by the pool of loans. Investors are entitled to the principal and interest payments generated from those assets. MBS are a type of securitized asset and are backed by residential and commercial mortgages. Agency MBS are the most well-known securitized asset issued by Fannie Mae, Freddie Mac, and Ginnie Mae.
Financial advisors who are interested in learning more about securitized assets can register for the Monday, November 1 webcast here.