Why was it necessary for the Federal Reserve to transact in the agency MBS market via external investment managers?
The operational and financial characteristics of MBS purchases are complex and require specialized technology and expertise to transact. The Federal Reserve chose external investment managers as a means of implementing the MBS program quickly and efficiently while at the same time minimizing operational and financial risks. Because of the size and complexity of the agency MBS program, a competitive request for proposal (RFP) process was employed to select four investment managers and a custodian. The selection criteria were based on the institutions’ operational capacity, size, overall experience in the MBS market and a competitive fee structure. The program custodian is J.P. Morgan. As of August 2009, the Federal Reserve streamlined the set of external investment managers, reducing the number of investment managers from four to two. The New York Fed retained Wellington Management Company, LLP for trading, settlement and as a secondary provider of risk and analytics support; and BlackR
Related Questions
- Why does the Federal Reserve continue to transact in agency MBS dollar rolls and coupon swaps following the completion of program purchases?
- Why is it necessary for the Federal Reserve to transact in the agency MBS market via external investment managers?
- With whom does the Federal Reserve transact agency MBS dollar rolls and coupon swaps?
