Alpha Through Analysis ®

We are the alternative!

MBS Mantra, LLC ("MBS Mantra") is an CT Registered Investment Advisor and is certified as a Minority Business Enterprise by the State of Connecticut. Alpha Research and Management ("ARAM") is a dba for MBS Mantra, under which we offer cross asset solutions and CIO services.

Strategies

MBS Mantra provides investment opportunities and solutions for family offices, trusts, foundations, endowments and other institutions. Our unique thought process results in a unique strategy, creating a High Income Diversifier.

MBS Mantra seeks to solve four major problems that investors face today: low income and yields, highly correlated and leveraged assets with high Betas and cross correlations, ubiquitous groupthink, and a fundamental structural flaw in Fixed Income Asset Management. Our primary strategies are thus Low-Beta strategies with High-income and Alpha.

Our Flagship MBS High Income/Absolute Return Strategy offers portfolios with High Alpha and Low Beta with most asset classes, and is a solution to the first three problems. This strategy is based on the insight that MBS are Variable Income Securities, but are miscategorized by the markets as Fixed Income Securities, since they are bonds. This strategy uses proprietary processes to directly target High Income Returns in MBS and structured products, and compounds portfolio cashflows at high rates, thus creating Alpha. This is an unlevered strategy - we use no margin or borrowing. The portfolios are primarily composed of senior bonds - we do not use or need to use Credit Leverage (subordinated bonds) to generate High Income. This is a steady growth strategy, ideal for patient capital. We create portfolio returns that are more stable than the returns of individual bonds, with a historical Sharpe ratio of ~2 (gross). This strategy has been developed and in use for over 25 years. We currently offer access in Separate Accounts and are seeking investors for a fund.

Our new strategy is a Distressed MBS Strategy. We have been researching, trading and investing in Distressed MBS for 30+ years, in the aftermath of every Financial Crisis since the 1980s (RTC, LTCM, Dot-Com, Great Financial Crisis of 2007) and have generated high returns in every case for ourselves and our clients. Since MBS Mantra was formed, we have believed that MBS Credit was too richly priced, with too much levered money chasing it. With the new March 2020 Crisis triggered in the aftermath of COVID-19, the leverage in the MBS market has collapsed, and most funds that invest in MBS have suffered from deleveraging and redemptions. We are expecting significant supply and opportunities in the coming months. This strategy differs from the High Income Strategy in that the portfolios will invest in Subordinated/Credit Levered bonds in MBS, CMBS and ABS, in addition to the traditional High Income MBS that we already invest in.

We also have other strategies to improve Alpha and reduce Beta and Risk that can be customized to solve specific client portfolio problems. An example is our Agg Plus Alpha strategy that optimizes portfolios of Fixed Income Funds to outperform the Bloomberg Barclays Aggregate Index.

Philosophy and Process

The foreword to a National Geographic publication on ‘100 Scientific Discoveries that changed the world’ offers much insight into our philosophy and process. In it, discussing the history of science, Timothy Ferris writes: “..big ideas came to be regarded as the providence of big thinkers. These intellectuals, as they were called, contributed valuable insights but seldom discovered or invented anything….Pioneering scientists like Galileo, Gilbert, Harvey and Newton had little use for scholarly analysis of venerable opinions...They were more apt to agree with Francis Bacon...who likened his Cambridge professors to ‘becalmed ships; they never move but by the wind of other men’s breath.’ ... The scientists preferred to find new facts…their points of reference came less from reading old books than from experimentation and observation.”

At MBS Mantra, we apply a scientific process of inquiry to finance and economics, preferring to revalidate what is accepted and “known”, and choosing to conduct our own exhaustive analyses by building on first principles in economics and finance. We do not blindly accept or apply theory, but rather allow the facts and the data to either validate theory, or lead us down a path of inquiry to create new thinking and theory. Our systematic process of analysis informs our understanding of Beta, and allows us to identify Alpha – ‘Alpha Through Analysis’®.

We have long combined the study of money supply with bond valuation, with much success, and have over the years identified many sources of Alpha in the MBS markets. Many of our historical Analyses, going back to 1988, are found on our website, and there are numerous examples where the markets have taken from years to decades to learn what we had already discovered.

Independence

We have a long history of independent, unbiased research and recommendations

We are not trend followers and choose “right” over “easy”

We have a long history of sell and don’t-buy recommendations

We share our opinions transparently, as to do otherwise is dishonest

We let the data speak to us, and create theory based on facts

We independently validate theory before accepting and incorporating it in our processes

We like to share what we have learned, even when it does not benefit us directly