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Securitised Credit: Sector in Brief
Securitised credit is attracting heightened attention from investors in the ‘lower for even longer’ climate. Read about the latest developments and available investment strategies, including a recent survey of securitised credit managers.
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IN THIS PAPER
Investment strategies. Recent years have seen the growth of a large group of strategies dedicated specifically to this asset class and its sub-sectors. There are now more than 180 strategies run by 75 asset managers; 116 of them are available in a pooled fund format. Includes snapshots of liquidity profiles, domiciles, fees and more.
Risk/return profiles. Investors can explore more conservative or more aggressive approaches in this asset class, with return targets ranging from cash plus 1-2% to more than cash plus 7%.
Need-to-know, sector by sector. An updated educational recap of essential information in all major sub-sectors: RMBS, CMBS, ABS, CLOs.
The COVID-19 era has driven increasing interest in securitised credit among institutional clients of various types. This appetite is partly driven by long-term data on diversification and return enhancement, and partly caused the perceived dislocations in this asset class, with particular focus on CLOs.
The asset class has evolved considerably over the last decade and the number of standalone pooled funds has risen considerably, now standing at more than 100. This is no longer an asset class that should be tarnished by pre-GFC practices: there has been a marked improvement in the quality of underwriting, structural protections and regulatory requirements.
The 2020 upheaval has also encouraged managers to launch strategies with longer lock-up periods. Investors should take care to ensure that liquidity provisions are in line with the underlying opportunity set and are sufficiently compensated by yield.
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This commentary is for institutional investors classified as Professional Clients as per FCA handbook rules COBS 3.5R. It does not constitute investment research, a financial promotion or a recommendation of any instrument, strategy or provider. The accuracy of information obtained from third parties has not been independently verified. Opinions not guarantees: the findings and opinions expressed herein are the intellectual property of bfinance and are subject to change; they are not intended to convey any guarantees as to the future performance of the investment products, asset classes, or capital markets discussed. The value of investments can go down as well as up.
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