First Quarter 2026 Commentary for Goldman Sachs U.S. Mortgages Fund
Navigating Market Currents: Performance and Outlook of Mortgage-Backed Securities
Goldman Sachs U.S. Mortgages Fund's Q1 2026 Performance Breakdown
The I shares of the Goldman Sachs U.S. Mortgages Fund recorded a net return of +0.11% in the first quarter of 2026. This performance was 28 basis points below its benchmark, the Bloomberg US Govt/MBS Index. The benchmark index itself achieved a +0.40% return over the same period, primarily due to the tightening of Option-Adjusted-Spreads.
Broader Market Trends and Treasury Sell-Off in Q1 2026
The first quarter of 2026 saw a widespread sell-off in U.S. Treasuries. This decline was more pronounced in the short end of the yield curve compared to the long end. Market sentiment was also significantly impacted by a notable escalation of geopolitical tensions in the Middle East, leading to concerns about economic growth. Further influencing market conditions was the release of the Consumer Price Index (CPI) data for March.
Investment Strategy Amidst Market Volatility
The fund's investment strategy for the quarter involved specific sector allocations and security selections. Overweights in Mortgage-Backed Securities (MBS) and Commercial Mortgage-Backed Securities (CMBS) were key components. The fund also focused on security selection within lower coupon Agency MBS and employed tactical positioning along the yield curve. These decisions were made in response to the volatility caused by the Middle East conflict.
Future Positioning and Diversification Efforts
Looking ahead, the fund maintains a bias towards curve steepening, anticipating future interest rate movements. To enhance diversification, it continues to overweight Agency MBS. Furthermore, the fund expects that technical factors, such as regulatory adjustments and renewed demand from banks and international investors, will provide support for the market.
Opportunities and Risks in Securitized Credit
Current opportunities are identified in Agency MBS, Single-Asset Single-Borrower (SASB) CMBS, and Collateralized Loan Obligations (CLOs). However, the market also presents risks, including potential weaknesses in the labor market, volatility in interest rates, and varied performance across different sectors. The fund addresses these risks through active security selection and by focusing on seasoned, equity-rich investment structures.