Commercial Property Securities on the Rebound

Commercial mortgage-backed securities, a once $400 billion market that went down to virtually nothing, is on it's way back, one hedge fund pro believes.

"As with many things, the underwriting standards, the ratings agency standards, got out of control—it got way too loose as we hit into '07," Jeffrey Kronthal, co-managing partner and co-CIO of the KLS Diversified Asset Management, a hedge fund that specializes in fixed income, told CNBC on Thursday.

"As with anything, when the market closes down and reopens up, the market is very conservative in its approach today," Kronthal said.

The market for securities backed by commercial real estate mortgages, known as CMBS, is different this time, he added, because underlying collateral is better, structures have been improved dramatically and conflicts of interests are resolved.

"We still like the commercial real estate market a lot in the CMBS markets," Kronthal said.

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