Asset-Backed Securities: A securitized products primer
Portfolio Managers John Kerschner and Securitized Products Analyst Will Palamet discuss how asset-backed securities (ABS) are created, their key characteristics, and what they might offer investors.
14 minute read
Key takeaways:
- At over $800 billion in size, the U.S. ABS market allows for investment in a wide variety of consumer and commercial cash-flowing assets, including but not limited to auto loans, credit cards, student loans, aircraft leases, data centers, and timeshares.
- ABS exhibit strong credit ratings, with more than half of all U.S. ABS carrying the coveted AAA credit rating. This compares favorably to the corporate investment-grade bond market, which includes only two companies that are rated AAA.
- While corporate bonds are an important component of a fixed income portfolio, the addition of ABS may help improve risk-adjusted returns due to their attractive yields, high credit quality, inherently low duration, and low correlation to equities.
Asset-backed securities (ABS) are pools of similar cash-flowing assets that are packaged together, or securitized, into investable securities and sold to investors.
The largest subsectors of ABS include auto loans, credit card receivables, and student loans, all of which grant investors exposure to the consumer credit market. A range of smaller subsectors give investors access to either consumer or commercial credit depending on the nature of their cash flow streams.
Download PDF
Related insights
This information is issued by Janus Henderson Investors (Australia) Institutional Funds Management Limited (AFSL 444266, ABN 16 165 119 531). The information herein shall not in any way constitute advice or an invitation to invest. It is solely for information purposes and subject to change without notice. This information does not purport to be a comprehensive statement or description of any markets or securities referred to within. Any references to individual securities do not constitute a securities recommendation. Past performance is not indicative of future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.
Whilst Janus Henderson Investors (Australia) Institutional Funds Management Limited believe that the information is correct at the date of this document, no warranty or representation is given to this effect and no responsibility can be accepted by Janus Henderson Investors (Australia) Institutional Funds Management Limited to any end users for any action taken on the basis of this information. All opinions and estimates in this information are subject to change without notice and are the views of the author at the time of publication. Janus Henderson Investors (Australia) Institutional Funds Management Limited is not under any obligation to update this information to the extent that it is or becomes out of date or incorrect.
14 minute read
Key takeaways:
- At over $800 billion in size, the U.S. ABS market allows for investment in a wide variety of consumer and commercial cash-flowing assets, including but not limited to auto loans, credit cards, student loans, aircraft leases, data centers, and timeshares.
- ABS exhibit strong credit ratings, with more than half of all U.S. ABS carrying the coveted AAA credit rating. This compares favorably to the corporate investment-grade bond market, which includes only two companies that are rated AAA.
- While corporate bonds are an important component of a fixed income portfolio, the addition of ABS may help improve risk-adjusted returns due to their attractive yields, high credit quality, inherently low duration, and low correlation to equities.