Institutional investors could increase their exposure to asset-backed securities (ABS) over the next three years, research suggests.
MPG, an asset management firm, polled 57 investors and found 60% of them expected their exposure to ABS to rise.
In total 35% of the respondents said ABS could be an attractive substitute for unsecured high yield corporate debt.
MPG said that over half (52%) of respondents recognised the role of ABS generally in offering an alternative to lending by banks and 27% said that the European Union would support the ABS sector because it has an important role to play in financing small and medium businesses.
Nearly two in five (38%) believed fund managers would use ABS to raise assets under management in their funds; 35% said demand would be driven by an increasing number of lenders looking to issue mortgage-backed securities; and 25% pointed to the strong growth in fintech companies, including alternative lenders that prefer to raise capital via ABS.
The results were released at the Global ABS 2018 conference in Barcelona, where MPG – which has about $500 million (€420 million) under management in a range of alternative and hedge funds – was due to say (Tuesday 5th) that a legal step-change in Europe is set to create a major new opportunity for institutional investors in transport-focused securitisations.
The firm said the Luxembourg Rail Protocol, which is currently undergoing EU ratification, will make it considerably easier for the private sector to finance railway rolling stock and ABS would provide the “ideal investment vehicles”.
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