Hyperion Brookfield's Agency Mortgage-Backed Securities Strategy seeks to provide investors with incremental returns over the Lehman MBS Index. The key component to this strategy is the successful forecasting of mortgage prepayment rates, not the direction of interest rates. Duration is not a primary contributor to performance. Any slight duration differential from the index is a result of our security selection process, in which we purchase securities which are currently being undervalued by the market. We do not allow duration to deviate substantially from the benchmark or take undue risk to add incremental return.

We believe that on a long-term basis, our approach to managing MBS portfolios will provide excess returns to our clients. The primary focus is on relative value opportunities among MBS, varying holdings by Agency loan program, coupon and loan seasoning. As a dynamic manager, with demonstrated expertise in the nuances of the MBS market, Hyperion Brookfield takes advantage of issue-specific opportunities. In evaluating duration exposure, we use a range of “option-adjusted” models, both those provided by Wall Street dealers, as well as Hyperion Brookfield’s proprietary analysis. In addition, under-weighting and over-weighting in coupon and sector selection can be as important as any single duration measurement in understanding a portfolio’s duration mismatch. We believe that outperformance can be generated without exposing our client's portfolio to the excessive duration risk inherent in certain prepayment intensive MBS securities.