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Commercial Mortgage-Backed Securities: A securitized products primer

Portfolio Managers John Kerschner and Portfolio Manager Jason Brooks discuss how commercial mortgage-backed securities (CMBS) are created, their key characteristics, and what they might offer investors.

6 Jun 2024
14 minute read

Key takeaways:

  • The U.S. CMBS market is comprised of five main subsectors: Multifamily housing (e.g., apartments, prefabricated homes), office, industrial (e.g., warehouses, data centers), retail, and hospitality (e.g., hotels, casinos, time shares).
  • At around $1.7 trillion in market capitalization, CMBS is bigger than the U.S. high yield market and is the second-largest securitized market in the U.S. behind agency mortgage-backed securities (MBS).
  • An actively managed portfolio may offer better diversification than passive CMBS benchmarks, which are heavily skewed to multifamily and office properties with little exposure to sectors that may offer better fundamentals and long-term growth potential.

 

Commercial mortgage-backed securities (CMBS) are collections of commercial mortgage loans that are bundled together, or securitized, and sold to investors. CMBS structures help to link the financing needs of real estate buyers with investors’ capital.

Commercial mortgage loans are loans issued by banks, insurers, and alternate lenders to finance purchases of commercial real estate, such as office, industrial, retail, hospitality, and multifamily housing facilities.

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These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. References made to individual securities do not constitute a recommendation to buy, sell or hold any security, investment strategy or market sector, and should not be assumed to be profitable. Janus Henderson Investors, its affiliated advisor, or its employees, may have a position in the securities mentioned.

 

Past performance does not predict future returns. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.

 

The information in this article does not qualify as an investment recommendation.

 

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6 Jun 2024
14 minute read

Key takeaways:

  • The U.S. CMBS market is comprised of five main subsectors: Multifamily housing (e.g., apartments, prefabricated homes), office, industrial (e.g., warehouses, data centers), retail, and hospitality (e.g., hotels, casinos, time shares).
  • At around $1.7 trillion in market capitalization, CMBS is bigger than the U.S. high yield market and is the second-largest securitized market in the U.S. behind agency mortgage-backed securities (MBS).
  • An actively managed portfolio may offer better diversification than passive CMBS benchmarks, which are heavily skewed to multifamily and office properties with little exposure to sectors that may offer better fundamentals and long-term growth potential.