Advantus Jumps Headlong into Mortgage Bond Trade
St. Paul, Minn.-based Advantus Capital Management, an institutional asset manager with $19.2 billion under management, said Wednesday afternoon that it will look to actively take advantage of the downturn in the mortgage securities market to launch a high-yield mortgage investment strategy, and the firm has added a portfolio manager to oversee its efforts in the area. "The timing to enter this market is excellent because spreads have widened substantially on residential and commercial mortgage securities rated AAA to BB-," said Chris Sebald, executive vice president and chief investment officer, Advantus. "Yield spreads on many mortgage securities are very wide, creating substantial value." Sebald said that Advantus had hired Dean Di Bias to manage the firm's high-yield mortgage investment strategy. Most recently, Di Bias was with GMAC-RFC in Bloomington, Minn., where he was managing director and senior vice president of credit portfolio management. "Dean has 20 years of experience in the mortgage industry, as a portfolio manager and issuer. He knows the business from both sides, and that insight fits in perfectly with our bottom-up investment style," Sebald said. Sebald says spreads on investment-grade securities offer significant compensation for potential credit risks. Additionally, the securitization markets have been so damaged by fallout from the housing downturn and its impact on mortgage and other debt securities, that Advantus believes that premiums to invest in the sector will remain attractive for some time to come. "History shows us that when losses rise in a sector, the yield premiums for investors rise and can remain high for a prolonged period," said Sebald. The company did not elaborate on the size of its fund, or whether Advantus would be looking to purchase primarily agency or private-party mortgage-backed securities.