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In this latest Axonic update, Travis Printz and Robert Duggan (Managing Directors) moderate a discussion with Ben Bernstein (Principal, Portfolio Manager) and Steven Jury (Managing Director, Portfolio Manager). The panel reviews 2025 performance, current portfolio positioning, and the opportunity set moving into 2026, with a focus on credit selection and relative value across structured markets.
2025 Performance: Broadly Balanced, with ABS Strength
Bernstein noted that results in 2025 were generally balanced across sectors, with the exception of the outperformance of ABS due to aviation exposure. As certain transactions continue to season and move closer to key structural milestones, market perception improved and cash flows strengthened, supporting performance in that sleeve.
Issuance and Relative Value
Both Portfolio Managers pointed to higher issuance as a defining feature of the market. Bernstein cited a sharp increase in RMBS and CMBS supply since 2023, which has helped support spreads. He also noted that, on a ratings-equivalent basis, structured credit has continued to offer yield pickup versus corporate bonds, as well as diversification and structural protections.
CMBS Positioning: Targeted SASB Exposure with Disciplined Risk
Jury reviewed the main CMBS structures (conduit, SASB, and CRE CLOs) and reiterated a preference for SASB, where underwriting can be more granular and liquidity tends to be stronger. Within SASB, he highlighted relative value in the single-A and triple-B parts of the capital stack, where spreads have remained attractive while attachment points are underwritten at conservative loan-to-value levels.
In terms of themes, the CMBS book remains diversified across property types, with larger allocations to hospitality and multifamily and modest, selective office exposure. Office remains bifurcated by market and asset quality; accordingly, new positions are focused on higher-quality properties with durable tenant demand.
RMBS Positioning: Rebalancing as RTL Pays Down
Bernstein described how RMBS positioning has become more balanced over the year as residential transitional loan (RTL) exposure has decreased through paydowns and calls. Capital has been redeployed into other RMBS segments based on relative value, including senior bonds backed by prime jumbo and non-QM collateral, along with select exposure to non-performing loan collateral where recovery profiles can support bond paydowns.
On housing, Bernstein stated the base case remains a stable national backdrop, with portfolio exposures structured to perform without relying on meaningful home price appreciation.
Rates and Emerging Areas
The team described a range-bound rate outlook and noted that lower, stable rates can support both commercial real estate activity and prepayment-sensitive RMBS exposures. Jury also discussed data centers as a growing theme across CMBS, ABS, and corporate credit, with Axonic participating selectively and focusing on diversified exposure by location and tenancy.
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