NYLI MacKay Securitized Income ETF (SECR)

A portfolio built on the foundation of mortgages and loans that have been bundled, sliced, and sold as securities — and SECR is a bet that those slices will hold their value and pay consistently.

The NYLI MacKay Securitized Income ETF (NASDAQ: SECR) is an actively managed fund that invests in securitized debt — primarily asset-backed and mortgage-backed securities issued or guaranteed by government agencies or private issuers — aiming to generate current income while managing credit and rate risk.

The securitized credit market and SECR’s role

Securitization is the financial process of bundling loans — mortgages, auto loans, credit card receivables, student loans — into tradable securities and selling slices of those securities to investors. The investor receives a share of the principal and interest that borrowers pay each month. Because the securities are backed by streams of actual loan payments (not just a corporate promise to repay), they occupy a middle ground between Treasury bonds and corporate credit: safer than unsecured corporate debt, but with more yield than pure government paper.

SECR builds a portfolio from this securitized landscape. The fund holds agency mortgage-backed securities (MBS) — mortgages that carry an implicit or explicit government guarantee, issued through Ginnie Mae, Fannie Mae, or Freddie Mac — and also non-agency securitized assets and credit securities. The active management team selects specific securities, maturity buckets, and credit exposures to generate yield while managing the risk that mortgages are prepaid early (eroding returns) or that credit quality deteriorates.

Income, duration, and prepayment risk

The appeal of SECR to income-focused investors is straightforward: securitized assets typically yield more than pure government bonds. However, that extra yield comes with complications that do not apply to simple Treasury bonds. The most important is prepayment risk: when interest rates fall, borrowers have an incentive to refinance their mortgages and pay off the underlying loans early, which returns the investor’s capital exactly when reinvestment rates are lowest. Conversely, when rates rise, mortgages are held longer than expected, locking the investor into below-market yields.

This dynamic means that securitized portfolios behave differently from Treasury portfolios in a changing interest-rate environment. As rates rise, the duration (interest-rate sensitivity) of a securitized fund can actually extend rather than contract, because prepayments slow and investors are stuck in lower-yielding loans for longer. The active manager team at SECR works to hedge or position for this by choosing securities that will behave as desired across different rate scenarios.

The credit layer

Beyond mortgages, SECR may hold non-agency securitizations and structured credit products — securities backed by auto loans, credit card receivables, or other consumer or commercial debt. These carry credit risk: if the underlying borrowers default at high rates, the security loses value. The fund’s active management team assesses the credit quality of the underlying loans, the seniority of the security in the capital structure, and the protective features (overcollateralization, reserve accounts) that cushion losses. This credit layer adds yield above agency MBS but also requires more due diligence and is more sensitive to economic slowdown.

Liquidity and trading spreads

Securitized securities trade less actively than Treasury bonds or large corporate bonds, so bid-ask spreads can be wider. The ETF wrapper provides daily liquidity — investors can buy and sell ETF shares on the NASDAQ during market hours — but the underlying securities markets are less liquid, which introduces tracking error between the ETF’s trading price and the net asset value of its holdings. During periods of market stress, liquidity in securitized credit typically dries up faster than in Treasuries, which can amplify losses or cause the fund to trade at a discount to its underlying value.

Risks and pressures

SECR faces several interconnected risks. Interest-rate risk is the largest: a significant rise in rates will compress the fund’s holdings and extend their duration, possibly for years. Prepayment risk works in the opposite direction: falling rates shorten duration and force reinvestment in lower yields. Credit risk applies to non-agency securitizations and structured credits, which can suffer if the underlying borrowers face economic stress. And liquidity risk — the possibility that securitized markets seize up during broader financial stress — can cause the fund to trade well below the value of its holdings.

The fund’s active management is intended to navigate these risks, but there are no guarantees. In a period of financial stress or a sharp rise in mortgage defaults, securitized assets can experience significant losses, which is why they are not suitable for capital-preservation portfolios despite their higher yield than Treasuries.

How to research SECR

Start with the fund prospectus and monthly factsheet from the issuer, which list current holdings and the maturity and credit composition of the portfolio. Understand the current weighted average life of the holdings — how long it will take for the portfolio to be paid down at historical prepayment speeds — and the duration, which shows how sensitive the fund is to interest-rate moves. Review the fund’s track record against a securitized index such as the Bloomberg Securitized MBS or Bloomberg Aggregate Bond Index to see whether active management has added or subtracted value.

Pay attention to the yield and spread over Treasuries — in periods when spreads are very wide, the fund offers more cushion but signals investor caution about securitized credit; when spreads are tight, the yield advantage is thinner and the risk-reward may be less attractive. And because securitized assets are sensitive to mortgage refinancing activity and economic cycles, monitor commentary on mortgage origination, refinancing rates, and recession indicators.