ABS is an attractive and yet under-utilised asset class with a number of differentiating features. The following paper provides a brief examination of this specialist asset class, outlining the case for its appeal as an investment.

Summary

  • The ABS universe represents a very broad opportunity set, offering investors greatly varying risk and return characteristics. It can offer diversification to core fixed income portfolios and the amortising structures and shorter durations can help reduce overall credit and interest rate risks. It can also complement the construction of cash flow aware portfolios.
  • Investing in ABS requires not only a unique and broad insight into the dynamics of the structured debt markets but also an ability to understand and analyse the risks in a securitisation transaction. For those that have the capability to perform the requisite analysis, ABS can offer the opportunity to earn attractive risk-adjusted returns.