Strategic Flexibility

CMOs fall into fixed-income portions of insurers’ investment strategy, but their flexibility allows them to be structured “in tune” with different market conditions.

It’s a much more hands-on type of strategy than the typical strategy where you buy a bond, you put it in the portfolio and you almost leave it to the mercy of the marketplace.

Allen Paksima, Prime Institutional Group

Our program is essentially a fixed income strategy that utilizes U.S. government agency backed mortgages bundled into CMOs, Prime Institutional’s Allen Paksima said. Agency CMOs are classified NAIC Class 1 for insurance investment purposes.

“We’re able to adapt or adjust to the market conditions and that allows us some flexibility. We’re not just using a PAC bond or a TAC bond and just riding the wave with it,” Prime’s Ray Gilliam said. “We have the flexibility to work in different market conditions so using PACs, TACs or sequentials, and inverse floaters as well, allows us to be more in tune with the market at any given time.”

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