DoubleLine Portfolio Manager Morris Chen discusses (0:08) with Gregg Greenberg, Retirement & Planning Editor for Investment News, the DoubleLine Commercial Real Estate ETF (DCMB). DCMB seeks current income and capital preservation. As a secondary objective, the fund seeks long-term capital appreciation. The fund actively invests in investment grade commercial mortgage-backed securities (CMBS). The talk took placed Oct. 3, 2023.
Due to uncertainties over parts of the commercial real estate space, particularly in office, (0:30), Mr. Chen says, the CMBS sector “has reset in value.” Office properties (1:02) represent only one part of the diverse commercial real estate sector. The sector also includes such segments as industrial properties, self-storage facililities, apartments and hotels – “a large swath of opportunity,” Mr. Chen says. He also reminds investors to distinguish between exposure to investment grade credit backed by commercial buildings versus equity in the sector. “If you're opportunistic, you do want to get exposure to the commercial real estate space. Buying mortgage bonds backed by commercial buildings I think is a good start.”
In the wake of investors “throwing out the baby with the bathwater,” Mr. Chen notes (2:11) that spreads on CMBS have widened out to the point where the market offers “AAA rated credits yielding 6% to 8%. You can say from a market standpoint, the market’s on sale.” Discussing the investment approach of DCMB (3:16), Mr. Chen say, “We like to invest in bonds that are backed by multiple, different property types. These issues, schematically speaking, by design have 25 to 50 different underlying loans. And I can tell you that as we're looking at these loans, we always try to deduce which one's going to pay off my bond.”
Mr. Chen joined DoubleLine at its inception in 2009. He is a Portfolio Manager leading the CMBS/CRE Debt Investment team and CRE New Investment Review Group, and is responsible for the oversight and management of all CRE Debt related investments at DoubleLine. Mr. Chen is a permanent member of the Fixed Income Asset Allocation and Structured Products Committees providing valued insight into the CMBS sector. He is also an active participant and speaker at CREFC events. Prior to DoubleLine, Mr. Chen was a Vice President at TCW where he was responsible for CMBS credit analysis and trading from 2004-2009. He holds a BS in Business Administration with concentrations in Business Development and Finance from the University of California, Riverside.