Securitised Credit

Distributed Securitised Credit can serve as a higher-income, lower-duration alternative to traditional fixed income in multi-asset portfolios.

• The market is worth $4 trillion and includes CLOs, CMBS, RMBS and other ABS; 13% of the Bloomberg Global Aggregate is already securitised credit, mainly US fixed-rate Agency MBS.
• Because the distributed universe is predominantly floating rate, it can generate income while reducing duration volatility, and its complexity and illiquidity premia support wider spreads than similarly rated corporate bonds.
• As of 31 July 2026, asset-swap spreads were 101 bps for AAA-A US CMBS and 122 bps for US AAA CLOs, respectively 20 bps and 41 bps above the ICE BofA AAA-A US Corporate Index.
• Over the previous 10 years, a 60/40 portfolio returned 7.0% annually with 10.4% volatility; replacing half of fixed income with HSBC’s securitised-credit composite raised return by 0.5 percentage points and reduced volatility by 0.2 points, while replacing all fixed income raised return by 0.6 points and reduced volatility by 0.2 points.
• From 30 June 2010 to 31 July 2026, HSBC’s Global Investment Grade Securitised Credit Composite returned 4.5% annualised versus 3.7% for the Bloomberg Global Aggregate Corporate Index, with 3.0% versus 5.1% volatility, a 0.9 versus 0.4 Sharpe ratio, and 0.7 versus 5.9 years of duration.
• US Agency MBS, despite representing about $12 trillion, mainly carries interest-rate risk and may not compensate investors sufficiently for duration in the current backdrop; active managers may instead find opportunities in the broader distributed market during dislocations.

Takeaway: Allocators should consider high-quality global securitised credit as part of, or potentially a replacement for, traditional fixed income because its income, lower duration and low correlation have improved historical risk-adjusted returns, although past performance does not predict future results and credit, liquidity and market risks remain.