TCW Group, New York, created an enhanced mortgage index investment vehicle providing investors with an efficient way of obtaining the market return of the Merrill Lynch Mortgage index plus a fixed spread over the index, currently 68 basis points. There are no management fees.
The enhanced mortgage index notes resemble an enhanced index fund but are an indexed component of a five-year, $1 billion collateralized bond obligation. The underlying mortgage-backed security portfolio, consisting of AA and AAA securities, is managed by TCW, said Fred Horton, managing director of TCW’s structured products group.
