The Regan Fixed Rate MBS ETF (MBSX) seeks to provide income through investment in fixed-rate mortgage-backed securities, which are bonds backed by pools of residential mortgages with unchanging interest rates throughout their life. This fixed income ETF focuses on government-sponsored enterprise MBS that offer steady income streams from homeowner mortgage payments.
How It Works
MBSX employs an active management approach to select fixed-rate mortgage-backed securities based on credit quality, yield potential, and duration characteristics. The fund likely focuses on agency MBS issued by Fannie Mae, Freddie Mac, and Ginnie Mae, which carry implicit government backing. Portfolio construction emphasizes balancing current income generation with interest rate sensitivity management. Holdings are continuously monitored and adjusted based on prepayment speeds, credit conditions, and yield curve positioning.
Key Features
- Specializes in fixed-rate MBS providing predictable coupon payments unaffected by changing mortgage rate environments
- 0.72% dividend yield offers attractive income potential in current interest rate environment for bond investors
- Recently launched in May 2025, providing access to actively managed MBS strategy in ETF wrapper
Risks
- This ETF can lose value when interest rates rise, as fixed-rate bonds decline in price, potentially causing 5-10% losses for each 1% rate increase
- Prepayment risk occurs when homeowners refinance mortgages early during rate declines, forcing reinvestment at lower yields and reducing income
- Credit spread widening during financial stress can cause MBS prices to fall even if Treasury rates remain stable
Who Should Own This
Best suited for conservative income-focused investors with 2-5 year time horizons seeking steady monthly distributions from mortgage securities. Low-to-medium risk tolerance required due to interest rate sensitivity. Works as satellite holding (5-15% of fixed income allocation) for investors wanting MBS exposure beyond traditional Treasury or corporate bond ETFs.