The Sustainable Attractiveness of Real Estate Debt
Fixed Income investors across the globe are facing challenges from historically low interest rates. Investors are having to look further afield to find positive real returns.
Investing in Commercial Mortgage Backed Securities (CMBS) offers a great opportunity to earn a relatively high yield in a currently low yielding market. The CMBS market is currently undervalued following the Financial Crisis and looks set to benefit from the ECB purchasing asset backed securities as part of its asset purchasing programme.
We think that CMBS, particularly in Europe, offer attractive yields and compare favourably with other asset classes when measured on their historic risk-adjusted returns.
Rogge’s Short Duration Global Real Estate Bond Fund invests predominantly in Commercial Mortgage Backed Securities (CMBS). These are bonds that are secured against a pool of commercial mortgages. We utilise our partnership with Heitman LLC, an established Real Estate management firm, to gain accurate valuations of the underlying assets involved in these CMBS and therefore have confidence of capital preservation
Since the launch of the fund, it has delivered superior returns to short dated Investment Grade Credit and High Yield markets, and looking forward the running yield is higher. The fund maintains an Investment Grade average rating of A whilst outperforming a lower rated High Yield benchmark.
The fund has lower interest rate risk than investing in Investment Grade bonds. This is because the majority of bonds in the portfolio are floating rate.