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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
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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6 Jun 2024
14 minute read
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.