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Revisiting Commercial Mortgage Backed Securities With An Expert Lens


  • While many other fixed income funds may own CMBS, only Ladder Select Bond Fund (LSBIX) provides a purpose-built, focus to the asset class in a no‐load, daily liquidity fund.
  • Unique approach is an opportunity for informed investors and institutions to make razor‐sharp allocations to this senior secured space as a diversifying complement to traditional fixed income portfolios.
  • CMBS securities may be timely for fixed income investors seeking secured income, reduced correlation, capital preservation protections and enhanced diversification.

The Institute for Innovation Development as part of our ongoing series of interviews exploring niche markets and innovative viewpoints from active asset managers recently talked with Craig Sedmak and Thomas Harney of Ladder Capital Asset Management. Ladder Capital is an internallymanaged commercial real estate finance REIT that counts TPG, KKR, Blackstone and Starwood among its peers, and is considered one of the leading nonbank U.S. commercial mortgage lenders. They also manage the LadderSelect Bond Fund [Institutional class ticker: (MUTF:LSBIX)], a no-load mutual fund focused on investment grade commercial mortgage backed securities. We asked Craig and Tom questions on their firm’s singular vantage point and research on the unique nature of the commercial mortgagebacked securities (CMBS) market.

Hortz: While not a new asset class, what did your expertise in commercial real estate finance tell you about the opportunity of establishing a noload mutual fund of commercial mortgage backed securities (CMBS)?

Harney: Our investment team has longstanding experience in the CMBS new‐issue and secondary trading markets, including familiarity with a significant portion of the actual real estate collateral underlying CMBS and their associated borrowers. This experience is particularly important, because we expect uneven growth rates and equity price action across industries, assets types, and geographic regions. By making available a pure‐play commercial real estate (CRE) finance fund with daily liquidity, we believe we’ve created the opportunity for informed investors and institutions to make razor‐sharp, self‐selected allocations to this senior secured space as a diversifying complement to traditional fixed income portfolios dominated by unsecured corporate bonds and Treasuries.

Hortz: Tell us more about the unique nature of these securities.

Sedmak: Commercial mortgage‐backed securities are principally bonds secured by mortgages on commercial properties. CMBS provides liquidity to real estate investors and commercial lenders and has been a longstanding favorite of insurance companies, pension funds, and other

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Institute for Innovation Development (IID) is an educational and business development catalyst for growth-oriented financial advisors and progressive financial services executives who are determined to grow their firms in a business environment of accelerating business and cultural change. Run as a social enterprise, the Institute will be dedicated to help make business innovation best practices a vital cornerstone for members’ ongoing growth, competitive differentiation, and client/community engagement strategies. Three current IID initiatives are: 1. Integrating business innovation mindsets, processes and tools into financial services practices through the formation of Advisor Practice Management 3.0 professional development. 2. Applying business innovation as a powerful and differentiating advisor marketing/branding approach and community engagement strategy. 3. Creating a FinTech radar program to increase communication and access between the financial advisor and early stage FinTech communities. Bill Hortz, Founder and Dean, of the Institute and Institute Founding Innovator members (comprised of top cross-industry innovation experts, innovative fintech companies, and progressive minded financial advisors and industry thought leaders) will be contributing articles and hopefully sparking ideas and discourse on much needed, next-generation advisor business models and industry development. We will seek to uncover proven business innovation best practices; learn from innovative business creators; explore innovation mindsets; hear about new approaches, services and technologies; and ultimately discover how to apply these insights to a financial advisor's business. For more details about the Institute, investigate here: https://innovationdevelopment.org/annual-membership

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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