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A Thoughtful--and Inexpensive--Mortgage Fund

Silver-rated BlackRock U.S. Mortgage Fund's recent cut in expenses adds to its appeal.

A Thoughtful--and Inexpensive--Mortgage Fund

Nov 22, 2016

Emory Zink: BlackRock U.S. Mortgage Fund offers investors a high-quality agency-centered mortgage portfolio with the flexibility to adjust out-of-benchmark relative value allocations--such as asset-backed securities and nonagency mortgage-backed securities--along the periphery.

Co-portfolio managers Matthew Kraeger and Siddharth Mehta gather macroeconomic perspectives from strategists across BlackRock and debate investment themes with other fixed-income portfolio managers on a weekly basis. Armed with this vetted context, they consult with sector specialists for trends and opportunities in more focused investment subgroups before reconciling investment themes with current market pricing--including relative value between sectors and fundamental bottom-up security valuation.

The results have been encouraging. Since Kraeger took the portfolio's reins in September 2009, through October 2016, the fund has generated a 5.7% annualized return and outpaced not only its Barclays US MBS Index, but also landed near the top performance decile of distinct MBS-benchmarked peers. With the fund's recent 5-basis-point drop in price, it now not only provides a thoughtfully managed mortgage portfolio, but it also offers this proposition at one of the lowest prices relative to similarly managed funds and earns a Morningstar Analyst Rating of Silver.

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