Angel Oak Mortgage-Backed Securities ETF (MBS) seeks to provide current income and capital appreciation by investing in mortgage-backed securities, which are bonds backed by pools of residential or commercial mortgages that pass through principal and interest payments to investors.
How It Works
The fund employs an actively managed approach to select mortgage-backed securities across government-sponsored enterprises (Fannie Mae, Freddie Mac), government agencies (Ginnie Mae), and private-label securities. Portfolio managers analyze credit quality, prepayment risk, and interest rate sensitivity to construct a diversified portfolio. The strategy focuses on optimizing yield while managing duration and credit risk through security selection and position sizing.
Key Features
- Newly launched ETF with 0.00% expense ratio, providing cost-free access to professional mortgage-backed securities management
- Attractive 4.39% dividend yield offering monthly income distributions from mortgage payment pass-throughs
- Active management by Angel Oak specialists with expertise in complex mortgage credit analysis and prepayment modeling
Risks
- This ETF can lose value when interest rates rise, as mortgage-backed securities are highly sensitive to rate changes and could decline 5-15% in rising rate environments
- Prepayment risk occurs when homeowners refinance mortgages early during rate declines, forcing reinvestment at lower yields and reducing total returns
- Credit risk from private-label mortgage securities could cause losses if underlying borrowers default, particularly during housing market downturns or economic recessions
Who Should Own This
Best suited for income-focused investors with medium risk tolerance seeking monthly distributions and 3-5 year time horizons. Works as a satellite holding (5-15% allocation) in fixed-income portfolios for those comfortable with mortgage market complexities and interest rate sensitivity.