Securities

Mitigate your duration risk while optimizing NIM and capital treatment.

OUR SECURITIES PLATFORM

Caird helps banks build and reposition bank securities portfolios. We help our clients manage down their duration and diversify away from taking a single implicit rate view while optimizing capital treatment. Your bank holds the securities while Caird collaborates with your existing team to advise and execute on your behalf.

See how your securities allocation can help you reach your goals

CAPITAL TREATMENT

0%1 US Treasuries Ginnie Mae MBS Ginnie Mae project loans Directly and unconditionally guaranteed by the US government 20%1 Fannie and Freddie MBS Municipal GO CLO AAA NQM AAA CLO AA These securitization exposures are risk-weighted by the SSFA formula, which carries a 20 percent floor. Senior tranches usually compute to the floor; less senior tranches may compute to a higher risk weight. 50%1 Municipal revenue Revenue obligation of a US public sector entity 100%1 Corporate C&I loan (including term loan Bs) The weight your C&I book already carries Rotating from agency RMBS into CLO AAA or NQM AAA is more a duration decision than a capital one. Both carry the same 20 percent risk weight. What changes is the rate exposure.

1. Standardized approach, 12 CFR parts 3, 217 and 324, subpart D. Government guarantees at 3.32, 217.32, 324.32; securitization exposures and the 20 percent floor at 3.43(f), 217.43(f), 324.43(f). Verified August 28, 2026. Banks on the advanced approaches, or with different charters or elections, may compute differently. Not regulatory or accounting advice; confirm with your own advisers and your primary regulator.

Credit subordination of CLO AAAs creates a material buffer from potential losses

The structural protection of the AAA tranche

A helpful way to illustrate the protection beneath a AAA tranche is in the context of history. Below is the sustained annual default rate the pool would have to experience before its return turns negative, compared to the worst year the loan market has actually had.

Annual loan default rate, on a generic BSL CLO structure What a AAA would have to absorb ~43%2 every year, for seven consecutive years, at 50% recovery The worst year the market has had ~11%2 2009, and for one year rather than seven 0%10%20% 30%40%50% For the AAA to incur losses, the worst year the market has ever had would have to nearly quadruple, then repeat for seven years.

2. Caird internal calculations. Illustrative stress on a generic broadly syndicated loan CLO structure, not any specific deal, security, account or portfolio. Assumes 50 percent average recovery and the stated default rate sustained annually for seven years. It is a break-even threshold, not a projection, target, or representation that any return will be achieved. Default rate measures vary by basis. Investing in these instruments involves risk, including the risk of total loss of principal.

What does our process look like?

1) Review of your current portfolio & goals

We tailor our advice to meet each client’s specific duration concerns, liquidity needs, and capital position.

2) Identify concentration/ duration risk

For example, with Agency RMBS, the prepayment option often obscures that the true spread is lower than the yield on the screen. We help clients build toward floating-rate, shorter weighted-average-life structures while optimizing for capital treatment.

3) Analyze and propose a target allocation

We utilize a mix of asset classes including but not limited to CLO AAA/AA, NQM AAA and GNPL, sized to your constraints and optimized for relative value.

4) Approval and execution

Every security is analyzed in-house. You approve every allocation before anything trades. We help clients scale their securities portfolios up and down in size to help them meet liquidity objectives across their organization.

5) Ongoing reporting


Our reporting is built to serve our clients needs spanning from ALCO to regulatory exams.

Let’s Start the Conversation

Bring us your challenges. We'll craft an approach.

info@cairdinvestments.com