Investors are drawn to commercial mortgage-backed securities (CMBS) for the potential yield enhancement, diversification benefits, and attractive risk-adjusted returns. And as one of the early investors in CMBS, our public debt team has modeled every U.S. fixed-rate conduit deal since 1999. Today, we research more than 500 CMBS issuances every year—in both seasoned and new-issue pools.
We strive to achieve consistent outperformance and believe that strong security selection and disciplined monitoring are the keys to reaching that goal. Our proprietary dynamic CMBS-default model is another factor in our success, allowing granular loan-level analysis to inform a robust investment process.
Conduit CMBS (Investment grade and high yield)
CMBS Interest Only (IO’s)
CMBS index (CMBX)
Agency CMBS
Single asset / Single borrower (SASB)
The versatility of CMBS meets specific investor needs:
Insurance companies rely on pre-payment protection and yield enhancement for asset-liability matching.
Money managers look for relative value, diversification, and alternative credit exposure versus traditional fixed income investments.
Asset allocators seek to improve the risk-return profile of broad, diversified portfolios.
Private equity managers and hedge funds can seek higher risk-return opportunities in lower-rated bonds, employ leverage, and utilize CMBX.
Pension funds may find value relative to real estate equity in opportunistic strategies.
Liability-driven investment managers can seek attractive yield enhancement and diversification at different duration points.
Defensive
- AAA credit quality
- Floating rate bonds
- "Trophy" property SASB
- Buy protection in CMBX
Balanced
- Focus on yield enhancement
- Interest only strips
- Relative-value positioning
- Active credit management
Opportunistic
- Utilize leverage
- Capitalize on market dislocations
- Below investment grade bonds
- Sell protection in CMBX
Our experienced investment teams provide comprehensive, specialized, and sustainable capabilities across all four quadrants of commercial real estate—public equity, private equity, public debt, and private debt—as well as infrastructure investing. Whatever real estate strategy or combination of strategies you believe is right for your objectives, we can help.
Past performance does not guarantee future results.
Investing involves risk, including possible loss of principal.
Real estate investment options, such as commercial mortgage-backed securities (CMBS), are subject to risks associated with credit, liquidity, interest rate fluctuation, adverse general and local economic conditions, and decreases in real estate values and occupancy rates.
Fixed-income investment options that invest in mortgage securities, such as commercial mortgage-backed securities, are subject to increased risk due to real estate exposure and carry greater risk compared to other securities in times of market stress.
Principal Real Estate is a trade name of Principal Real Estate Investors, LLC, an affiliate of Principal Global Investors.