High Yield CMBS Yield Oriented Return

Overview

Yield Oriented Return is a Commercial-Mortgage Backed Securities (CMBS) strategy that seeks to provide current yield and opportunities for total return, over the long-term, primarily through bottom-up security selection. 

Why choose this investment strategy?
We’ve been analyzing and purchasing CMBS since their inception in the late 1990s. Our Yield Oriented Return strategy offers several benefits:

•    Access to cross-asset insights of Principal Global Investors: We believe a deep understanding of real estate—especially granular loan-level analysis—is critical to CMBS success. That granular analysis is an essential part of our investment process, along with the “on-the-ground” due diligence insights we get from our broader Principal Real Estate Investors team. 

We also look to the insights of Principal Global Fixed Income to gain a better understanding of underlying securities, due to CMBS spanning the real estate and fixed income asset classes.

•    An experienced investment team: As one of the early investors in the market, we’ve developed valuable and wide-ranging relationships with market participants. Our CMBS team of investment professionals brings over 133 combined years of commercial real estate and/or CMBS experience to your portfolio.

•    Proprietary research and modeling: Our investment process combines loan-level analysis with quantitative modeling. We conduct independent research on over 600 CMBS bonds per year. We’ve also developed a proprietary, dynamic CMBS default model that allows us to analyze a full distribution of potential bond returns, based on 2,000 different economic scenarios, including tail events.

Where Yield Oriented Return invests
We select securities that offer attractive risk-adjusted returns, based on our projection of fair value relative to current market price. Our dynamic investment process allows us to internally rate credit risk, identify relative value from a risk-adjusted perspective, assess cash-flow volatility, and actively manage risk through market cycles. 

We also continuously monitor macroeconomic factors and technical influences to help provide you with the best possible return. 

 

See also:

CMBS: Understanding the Basics

U.S. Commercial Mortgage-Backed Securities FAQs

Commercial Mortgage-Backed Securities Quarterly Commentary