The mortgage-backed securities market has bottomed out, making it a good time to step in, believes Marcia Myerberg, chief executive officer of Myerberg & Co. L.P., a new investment banking firm in New York specializing in mortgage-backed securities.
Prepayments seem to have slowed down, and there is a back-to-basics approach among the new issues in the market, with fewer tranches and more predictable cash flows than before, she said.
Meanwhile, "toxic waste" - illiquid and undesirable offerings - are not appearing in the market very often, and usually only from sellers wishing to dispose of them, she said.
Some buyers have taken a wait-and-see attitude with the more arcane securities - inverse floaters, interest-only and principal-only strips, she said, but added that potential clients have expressed growing interest in more traditional securities. Commercial mortgages, whole-loan packages and agency collateralized mortgage obligations are attractive alternatives for institutional investors interested in the asset-backed sector, she said.
The new firm's client base is all institutional investors, said Ms. Myerberg. She would not disclose names, but said the firm seeks to work with money managers, insurance companies, banks and pension funds.
Ms. Myerberg said she would like the firm to venture into money management next year, but she plans to concentrate on getting the broker-dealer operation going first. If the firm does enter money management, it would stay in the taxable fixed-income sector, and particularly mortgage-backed securities, she said.
"I'd like to be in money management with maybe an index-linked strategy," she said.