GLOBAL - Many pension funds continue to shy away from mortgage-backed securities (MBS), despite claims there could be opportunities within the asset class.
Global Pensions first reported in February that worthwhile investment opportunities in high quality MBS were being overlooked by pension funds, due to their aversion to sub-prime MBS (www.globalpensions.com; 12 February 2008).
Warren Davies, senior portfolio manager, Aberdeen Asset Management, said at the time: "Some investors hear 'mortgage' and dismiss the investment idea immediately."
Speaking this week, Bellman said pension funds should target mispriced commercial mortgage-backed securities in North America and Europe. He said current market conditions offered better opportunities than 12 months ago.
However, he added he expected a continuing correction in values in the short term, therefore pension funds would need to weather the downturn before reaping the benefits of the upswing.
Joseph McDevitt, managing director, head of PIMCO Europe, commented: "There are definitely opportunities within the prime MBS asset class, so good deals are possible, but you require the skills to spot them."
McDevitt added he believed some pension funds were taking advantage of them, but they faced a problem of liquidity.
Advantus Capital Management this week announced it was launching a high-yield mortgage investment strategy, aimed at taking advantage of the downturn in the mortgage securities market.
Chris Sebald, executive vice president and CIO, Advantus, said: "The timing to enter this market is excellent because spreads have widened substantially on residential and commercial mortgage securities rated AAA to BB-."
PTL has appointed Karein Davie as a client director in its Birmingham office.
The level of interest rate hedging increased to £29.5bn of liabilities in the second quarter as pension funds continued to de-risk, according to BMO Global Asset Management's research.
UK inflation has risen for the first time since November to 2.5% in July, up from 2.4% in June, thanks to rising fuel costs and the price of computer games.
The number of DB pension scheme trustees targeting a buyout with an insurer has increased significantly in the past five years, latest research from Willis Towers Watson shows.