Commercial Real Estate as the Next Shoe to Drop, What are you Yellen?!

The U.S. commercial real estate market accounts for over $2 trillion of associated debt with 23% of that found within Commercial Mortgage Backed Securities (CMBS). We have long been participants in the CMBS sector as it often provides both diversification within the broad fixed income market as well as compelling relative value versus other sub-sectors. Despite the clear benefits, we must be diligent when analyzing potential CMBS holdings as they are slightly less liquid than corporate bonds and while they may look homogeneous on the outside, the securitized deals themselves have unique collateral as well as structural differences.