SECU hunts for yield in the corners of the bond market where most investors don't look — securitized debt like mortgage-backed securities, asset-backed securities, and commercial paper. It's BlackRock's attempt to squeeze extra income from structured credit without taking on corporate or government risk.
How It Works
The fund actively manages a portfolio of securitized debt, focusing on agency MBS, non-agency residential and commercial mortgage securities, and various asset-backed instruments. Portfolio managers use BlackRock's credit research to identify mispriced securities and sectors, adjusting duration and credit exposure based on market conditions. The active approach allows tactical shifts between securitized sectors as spreads and fundamentals change.
Key Features
- Active management in a space where security selection actually matters — securitized markets are less efficient than corporates
- Diversification beyond traditional bonds — low correlation to corporate credit cycles and Treasury movements
- Institutional-quality access to complex securities that retail investors can't easily buy directly
Risks
- Prepayment risk can crush returns when rates drop — homeowners refinance, leaving you reinvesting at lower yields
- Liquidity can evaporate in securitized markets during stress — bid-ask spreads widen 5-10x in crisis conditions
- Complexity risk — even professionals struggle to model some structured securities, creating unexpected losses
Who Should Own This
Best for income-focused investors who already own corporate and government bonds and want to diversify their yield sources. Works well as a 10-20% sleeve in a fixed income allocation for those comfortable with the complexity. Not suitable for investors who need simple, predictable cash flows or those spooked by anything with 'mortgage' in the name after 2008.