New REITs, Hedge Funds Buy Into C-Series
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Fannie Mae headquarters
WASHINGTON, DC—Fannie Mae’s latest Connecticut Avenue Securities series saw a number of new institutional investors participate, Laurel Davis, vice president for credit risk transfer at Fannie Mae, tells GlobeSt.com. These included new asset managers, hedge funds, REITs and insurance companies. “We also saw new international participation in the book,” she says.
It is a telling sign for the two-year-old credit risk transfer offering from Fannie Mae, a structure that passes off much of the risk to third-party investors — especially as interest rate increases are clearly imminent. These risk-sharing deals — Freddie Mac also has its own version — are typically issued with floating rate coupons, which reduces investor duration risk. “On the margin, we would expect greater interest for floating rate securities in a rising rate environment, especially since these are uncapped floaters, which are relatively rare,” Davis says…
