The Diamond Hill Securitized Total Return Fund returned 1.07% during Q4 2025, underperforming the Bloomberg US Securitized: MBS, ABS and CMBS Index by 61 basis points. This performance lag was largely driven by the fund’s allocation to commercial mortgage-backed securities (CMBS) and asset-backed securities (ABS), which trailed the broader market.
The Diamond Hill Securitized Total Return Fund, managed by Diamond Hill Capital Management, focuses on investing in a diversified portfolio of securitized assets, including mortgage-backed securities (MBS), CMBS, and ABS. As of Q4 2025, the fund’s portfolio consisted of approximately 70% MBS, 20% CMBS, and 10% ABS. The fund’s underperformance can be attributed to the challenges faced by the CMBS and ABS markets during the quarter, which were impacted by rising interest rates and concerns over credit quality.
The Bloomberg US Securitized: MBS, ABS and CMBS Index, which serves as the fund’s benchmark, returned 1.68% during Q4 2025. The index’s outperformance was driven by the strong returns of MBS, which benefited from the decline in interest rates during the quarter. In contrast, the CMBS and ABS markets struggled, with spreads widening due to concerns over credit quality and liquidity. The fund’s allocation to these sectors, including holdings in $AGNC and $NLY, weighed on its overall performance.
The fund’s managers noted that the Q4 2025 performance was impacted by the market’s reaction to the Federal Reserve’s monetary policy decisions. The Fed’s decision to raise interest rates during the quarter led to a flattening of the yield curve, which negatively impacted the fund’s CMBS and ABS holdings. Despite the challenges, the fund’s managers remain optimistic about the outlook for securitized assets, citing the attractive yields and relative value offered by these markets.
The following table summarizes the fund’s Q4 2025 performance:
| Index | Return |
|---|---|
| Diamond Hill Securitized Total Return Fund | 1.07% |
| Bloomberg US Securitized: MBS, ABS and CMBS Index | 1.68% |
Looking ahead, the fund’s managers expect the securitized markets to remain volatile, driven by ongoing concerns over interest rates and credit quality. However, they believe that the fund’s diversified portfolio and active management approach will enable it to navigate these challenges and deliver strong returns over the long term.
⚡ Why it matters: The Diamond Hill Securitized Total Return Fund’s Q4 2025 performance highlights the challenges faced by securitized asset managers in navigating the complexities of the MBS, CMBS, and ABS markets.
⚡ Why it matters: Investors seeking income and relative value in their portfolios should closely monitor the performance of securitized asset funds.
📊 By the numbers:
Return: 1.07%
Underperformance: 61 basis points
Benchmark return: 1.68%
🔗 Source: Diamond Hill Capital Management*
