We believe there is a great opportunity to invest in residential mortgage and consumer loan pools, not least due to relatively high and stable spreads, historically lower volatility and an illiquidity premium versus corporate bonds, but also because the asset class can provide investors with a scalable opportunity to diversify the core portion of the investment portfolio that is relatively unique.
Furthermore, for insurance investors, the capital treatment under the standard formula for investing in these assets is extremely favourable, which as a result could drive exceptional return on capital metrics.
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The value of investments will fluctuate, which will cause prices to fall as well as rise and you may not get back the original amount you invested.