If You Invested in Regan Fixed Rate MBS ETF (MBSX)

The Regan Fixed Rate MBS ETF (NYSE: MBSX) is an actively managed exchange-traded fund that invests primarily in fixed rate Agency Residential Mortgage-Backed Securities (RMBS). According to Regan Capital, the fund is designed to give investors access to the Agency RMBS market, which is described as a massive segment of the fixed income universe backed by government sponsored entities such as Fannie Mae and Freddie Mac.

MBSX is managed by Regan Capital, LLC, an SEC Registered Investment Adviser based in Dallas, Texas. Regan Capital focuses on fixed income strategies with an emphasis on mortgage-related securities. The firm notes that Agency RMBS typically offer higher yields than U.S. Treasury bonds without what it characterizes as significant additional risk, because the securities are backed by government sponsored entities.

The ETF’s stated objective is to invest primarily in fixed rate Agency RMBS and to seek to enhance the yield spread that these securities often have over Treasury bonds and corporate bonds. Regan Capital attributes this potential enhancement to the alpha generated from an actively managed portfolio of Agency RMBS. The fund does not seek to replicate the performance of any index, underscoring its active management approach.

The Agency RMBS held by MBSX are purchased on over-the-counter (OTC) markets. Regan Capital notes that these markets are typically only available to investors with deep relationships with primary dealers and brokers. By packaging these securities in an ETF format, MBSX is described as providing broader access to this market segment for exchange-traded investors.

Regan Capital highlights that the fixed rate focus of MBSX is intended to offer a more stable and predictable income profile, particularly during periods of volatility across many asset classes. The firm also states that fixed rate Agency RMBS are considered by them to be immune from tariffs, since they are priced on existing U.S. home loans and are not reliant on the construction of future homes that could be affected by rising materials and building costs related to tariffs.

MBSX is launched and managed by a team with experience in asset-backed securities and mortgage-backed securities. Regan Capital references its broader product lineup, including the Regan Floating Rate MBS ETF (MBSF) and the Regan Total Return Income Fund (RCIRX), to illustrate its focus on mortgage and fixed income strategies. While those other products are separate from MBSX, they show the firm’s ongoing involvement in mortgage bond investing.

The ETF carries an annual operating expense fee of 0.40%, as disclosed by Regan Capital. The firm also emphasizes that the fund is newly formed and has no operating history, and that exchange traded fund investing involves risk, including possible loss of principal. MBSX invests in mortgage-backed securities issued or guaranteed by the U.S. government or its agencies or sponsored entities, some of which may not be backed by the full faith and credit of the U.S. government.

Regan Capital notes that MBS are subject to interest rate, prepayment, and extension risk, and that they are dependent on real estate prices and real estate fundamentals. When real estate prices experience a significant decline, the securities in the fund may be negatively affected. Regulatory actions may also have an adverse impact on real estate prices and, by extension, on MBSX’s holdings.

The firm further explains that ETFs such as MBSX face specific structural risks. Shares trade on an exchange at market prices that may differ from net asset value (NAV), and there is no assurance that an active secondary trading market will develop or be maintained. Trading may be halted by the exchange, which can affect an ETF’s ability to sell its shares. Shares are bought and sold at market price and are not individually redeemed from the ETF, and brokerage commissions can reduce returns.

Regan Capital repeatedly advises that investors should carefully consider the investment objective, risks, charges, and expenses of the fund before investing, and that this information is contained in the fund’s prospectus. The firm states that there is no guarantee any investment strategy will achieve its objectives, generate profits, or avoid losses, and that diversification does not ensure a profit or guarantee against loss.