Mining Structured Credit for Incremental Yield, Duration Management and Diversification

Rhea-AI Summary

On October 25, 2021, Ken Shinoda, Portfolio Manager of the DoubleLine Income Fund, highlighted investment opportunities in structured products within the fixed income universe. His commentary titled "Mining Structured Credit for Incremental Yield, Duration Management and Diversification" discusses the advantages of structured credit, including private-label residential mortgage-backed securities and collateralized loan obligations. Shinoda emphasizes their ability to provide attractive yields while offering diversification and risk management benefits in portfolio construction.

Positive

• Structured products offer attractive incremental yields compared to their interest rate sensitivity.
• The Fund primarily invests in structured products, reducing reliance on single-name corporate issuers.
• As of September 30, 2021, DoubleLine Capital managed $137 billion in assets.

Negative

• Investments in debt securities typically decrease in value with rising interest rates.
• Lower-rated and non-rated securities present greater risks of loss to principal and interest.

LOS ANGELES, Oct. 25, 2021 /PRNewswire/ -- In a new commentary, Ken Shinoda, Portfolio Manager of the DoubleLine Income Fund ("the Fund"), surveys the structured product universe, describing its investment opportunities, its place within the broader fixed income universe and the Fund's investment approach to the asset class.

To read the commentary, "Mining Structured Credit for Incremental Yield, Duration Management and Diversification," please go to this landing page: https://doublelinefunds.com/wp-content/uploads/In-Search-of-Yield-and-Diversification.pdf

Structured products include government- and quasi-government-guaranteed Agency mortgage securities and structured credit, the latter including, Mr. Shinoda writes, "private-label residential mortgage-backed securities (RMBS); commercial mortgage-backed securities (CMBS); other asset-backed securities (ABS), such as securitizations of aircraft leases, credit card receivables and student loans; and collateralized loan obligations (CLOs). These subsectors of structured credit offer attractive incremental yields, in particular relative to their interest rate sensitivity. Furthermore, structured credit is secured to collateral distinct from the balance sheets of single-name corporate issuers, offering meaningful diversification."

The Fund (I shares DBLIX; N shares DBLNX), led by Portfolio Managers Shinoda, Morris Chen and Andrew Hsu, invests primarily in structured products.

DoubleLine Income Fund
Sector Breakdown % as of Sept. 30, 2021
Non-Agency Residential MBS			29.11
Commercial MBS			22.58
Collateralized Loan Obligations			16.75
Agency Residential MBS			12.39
Asset-Backed Securities			9.21
Government			3.07
Investment Grade Corporates			0.78
Cash			6.12
Total			100.00

In the commentary, Mr. Shinoda describes "the composition of the structured credit universe and the factors that make this asset class an attractive investment for incremental yield. With these factors in mind, investors can use structured credit exposure to serve in several roles: as a partner to below-investment-grade corporate credit within an allocation for incremental yield; as a stand-alone allocation for incremental yield; or as the credit-risk half of a barbell to the investment grade anchor of a diversified fixed income portfolio. Then from theory to practice, I will discuss the implementation of structured credit in the portfolio construction aimed at achieving our objectives for yield, return and risk management for the DoubleLine Income Fund."

About DoubleLine Capital LP

DoubleLine Capital LP is an investment adviser registered under the Investment Advisers Act of 1940. DoubleLine's offices can be reached by telephone at (213) 633-8200 or by e-mail at info@doubleline.com. As of the Sept. 30 close of the third quarter of 2021, DoubleLine Capital LP and its related entities managed $137 billion in assets across all vehicles, including open-end mutual funds, collective investment trusts, closed-end funds, exchange-traded funds, hedge funds, variable annuities, UCITS and separate accounts. News media can reach DoubleLine by e-mail at media@doubleline.com. DoubleLine® is a registered trademark of DoubleLine Capital LP.

• This material contains the opinions of the manager as of the date it was published and such opinions are subject to change without notice.
  
  
• The material represents DoubleLine's intellectual property. No portion of this presentation may be published, reproduced, transmitted, or rebroadcast in any media in any form without the express written permission of DoubleLine. To receive permission from DoubleLine, please contact media@doubleline.com.
  
  
• The views and forecasts expressed in any materials on this website are as of the date indicated, are subject to change without notice, may not come to pass and do not represent a recommendation or offer of any particular security, strategy, or investment. DoubleLine has no obligation to provide revised assessments in the event of changed circumstances. There can be no assurance that the strategies described will achieve their objectives and goals.

Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. Investments in lower-rated and non-rated securities present a greater risk of loss to principal and interest than higher-rated securities. Investments in ABS and MBS include additional risks that investors should be aware of such as credit risk, prepayment risk, possible illiquidity and default, as well as increased susceptibility to adverse economic developments. The Fund may use leverage which may cause the effect of an increase or decrease in the value of the portfolio securities to be magnified and the Fund to be more volatile than if leverage was not used. Derivatives involve special risks including correlation, counterparty, liquidity, operational, accounting and tax risks. These risks, in certain cases, may be greater than the risks presented by more traditional investments. Diversification does not assure a profit, nor does it protect against a loss in a declining market.

The Fund's investment objectives, risks, charges and expenses must be considered carefully before investing. The statutory and summary prospectus contain this and other important information about the investment company, and may be obtained by calling (877) 354-6311 / (877) DLINE11, or visiting www.doublelinefunds.com. Read them carefully before investing.

DoubleLine Funds are distributed by Quasar Distributors, LLC. DoubleLine® is a registered trademark of DoubleLine Capital LP.

 

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SOURCE DoubleLine

FAQ

What are structured products and why are they important for the DoubleLine Income Fund?

Structured products, including mortgage-backed securities and collateralized loan obligations, provide attractive yields and diversification, making them crucial for the DoubleLine Income Fund's strategy.

What is the investment strategy of the DoubleLine Income Fund?

The DoubleLine Income Fund focuses on structured products to achieve incremental yield, duration management, and risk diversification.

How much does DoubleLine Capital manage as of September 30, 2021?

As of September 30, 2021, DoubleLine Capital managed $137 billion in assets.

What risks are associated with investments in structured credit?

Risks include credit risk, prepayment risk, possible illiquidity, and default, especially in lower-rated securities.

Why should investors consider structured products?

Investors may consider structured products for their ability to offer attractive yields and serve as a diversification tool in fixed income portfolios.