Understanding Residential Mortgage-Backed Securities
The most liquid component of the European securitised market, RMBS are important funding mechanisms for household mortgage lenders. In Europe, there are three main types: prime (originated by high street banks); non-conforming (alternative lender funding to non-standard borrowers); and buy-to-let (funding for professional landlords).
What are Residential Mortgage-Backed Securities (RMBS)?
RMBS are collections of residential mortgages with similar characteristics that are packaged together. The cashflows (principal and interest payments) from the underlying mortgage loans are passed through to service investor debt tranches.
Why Janus Henderson for RMBS?
Expertise and leadership: Our portfolio management team's nearly 60 years of combined experience, backed by a dedicated global team, stands as a testament to our success. This unparalleled expertise ensures we remain at the forefront of securitised investment management.
Market dominance: Janus Henderson has been at the forefront of active fixed income ETF innovation and has an extremely successful proposition where we are the third largest provider of actively managed fixed income ETFs globally¹ and the largest securitised active ETF manager globally².
¹ Source: Morningstar as of 30 September 2024.
² Source: Morningstar, as of 16 December 2024.
€51B
Firmwide securitised assets (as of 30/06/25)
Source: Janus Henderson Investors as of 30 June 2025.
Note: Firmwide assets include securitised products available outside of Europe and securitised portions of other fixed income strategies.
Dedicated securitised expertise
Global Head of Securitised Products | Portfolio Manager
Head of Structured and Quantitative Fixed Income | Portfolio Manager
Portfolio Manager
Lead - Fixed Income Client Portfolio Management (EMEA) / Fixed Income ESG
Key characteristics of RMBS
1
Attractive yields
While yields can vary greatly within RMBS, the sector broadly offers attractive yields relative to corporate bonds of similar ratings.
2
Diversification of risk exposures
In contrast to corporate bonds, where investors are exposed to a single borrower, RMBS are comprised of pools of thousands of individual loans from different borrowers. RMBS also allow investors to diversify their overall risk exposure by including assets linked to the consumer.
3
Securitisation creates tranches with varying degrees of risk
Like most securitised sectors, RMBS are divided into tranches of differing credit quality. This allows investors to gain exposure to assets within the sector, while also dealing in their preferred level of risk.
4
Prepayment risk
Borrowers may pay off or refinance their mortgage at any point, which would negate the future income on that mortgage. RMBS pay an additional yield, or spread, above the yield on a comparable government bond to compensate investors for the uncertainty about when, or if, a borrower will prepay their mortgage.
5
Default risk
Unlike Agency MBS, which carry a government guarantee and have negligible credit risk, investors in RMBS are exposed to default risk. As a result, RMBS pay higher credit spreads than agency MBS.