Asset-backed securities (ABS)—also called securitized products or structured credit—finance pools of familiar asset types, such as auto loans, aircraft leases, credit card receivables, mortgages, and business loans. In one way or another, these asset types represent contractual obligations to pay. The principal job of ABS investors is to determine value by analyzing the cash flows that result from these obligations, rather than relying solely on the value of any hard asset collateral.
An introduction to securitized products from the leaders of our ABS group.
- Securitization begins with the creation of a special purpose vehicle that acquires a pool of assets and simultaneously issues asset-backed securities to fund the purchase of those assets.
- The pool of securitized assets are contractual obligations to pay that are typically the same type (auto loans, aircraft leases, credit card receivables, corporate loans, etc.) but represent diverse payers.
- With $1.3 trillion outstanding, non-mortgage ABS represents just 4 percent of the fixed-income universe.
- ABS debt boasts investor-friendly features that may help protect against loss and improve liquidity, including bankruptcy remoteness, prioritization of payments, overcollateralization, excess spread, amortization, professional servicing, and diversity of payers within each underlying pool.
- Despite these and other strengths, ABS have offered higher yields than similarly rated municipal or corporate bonds.
- Securitizations fund lenders, lessors or other specialty finance companies, or provide debt capital to traditional corporate borrowers that have contracts that are considered to be of higher credit quality than the corporation’s own unsecured debt. We illustrate such a situation with a case study.
- Successful investment in structured credit requires dedicated credit, trading, technology, and legal resources, institutional knowledge, and a disciplined investment process.
Guggenheim Investments represents the investment management businesses of Guggenheim Partners, LLC ("Guggenheim").
Guggenheim Funds Distributors, LLC is an affiliate of Guggenheim.
Read a prospectus and summary prospectus (if available) carefully before investing. It contains the investment objective, risks charges, expenses and the other information, which should be considered carefully before investing. To obtain a prospectus and summary prospectus (if available) click here or call 800.820.0888.
*Guggenheim Investments total asset figure is as of 12.31.2016. The assets include leverage of $12.3bn for assets under management and $0.4bn for assets for which we provide administrative services.
Guggenheim Investments represents the investment management businesses of Guggenheim Partners, LLC ("Guggenheim"), which includes Security Investors, LLC ("SI"), Guggenheim Funds Investment Advisors, LLC, ("GFIA") and Guggenheim Partners Investment Management ("GPIM") the investment advisers to the referenced funds. Securities offered through Guggenheim Funds Distributors, LLC, an affiliate of Guggenheim, SI, GFIA and GPIM.
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