DSCO hunts for yield in the mortgage-backed securities market where DoubleLine made its reputation, targeting the complex corners of securitized credit that most bond funds avoid. This actively managed ETF leverages DoubleLine's expertise in residential and commercial mortgage securities to generate income beyond traditional corporate bonds.
How It Works
The fund invests across the securitized credit spectrum — agency and non-agency residential mortgages, commercial mortgage-backed securities, and asset-backed securities. DoubleLine's team actively trades based on prepayment expectations, credit analysis of underlying collateral, and structural features of different tranches. They can go anywhere from government-guaranteed agency MBS to riskier non-QM mortgages, adjusting the mix based on relative value opportunities.
Key Features
- Active management from DoubleLine's mortgage specialists who built their reputation navigating the 2008 crisis
- Access to institutional-grade securitized credit analysis typically reserved for hedge funds and insurance companies
- Flexibility to pivot between agency MBS, non-agency RMBS, CMBS, and ABS based on market dislocations
Risks
- Prepayment risk can crush returns when rates drop and homeowners refinance, leaving you reinvesting at lower yields
- Non-agency mortgage exposure means real credit risk — these securities can lose 20-40% in a housing downturn
- Complex securities with embedded options can behave unpredictably, especially during market stress when correlations break
Who Should Own This
Best suited for yield-hungry investors who understand that 1.41% current yield seems low because the fund likely holds significant agency MBS trading at premiums. You need faith in DoubleLine's ability to navigate prepayment waves and credit cycles — this isn't a set-and-forget core bond holding but rather a satellite position for those seeking differentiated fixed income exposure beyond corporate credit.