After playing defense in 2022, investors appear to be willing to deploy capital even as the MBS and ABS markets face numerous headwinds. Attendance at this week’s SFVegas conference hit a record level.
S&P Global Ratings said that the advantages of decentralized finance securitizations, including increased transaction speeds and greater transparency, are counterbalanced by several risks in the sector. Many of the risks are inherent to the use of a blockchain, like difficulty correcting errors in registered information.
Bank holdings of ABS backed by auto loans and financing for businesses rose solidly in the fourth quarter, offsetting declines in consumer and credit card securitizations. (Includes two data charts.)
Companies looking for financing that previously haven’t tapped the ABS market are seeing ABS issuance as an option due to changes in the broader financial market.
Private equity investors are turning to collateralized fund obligations, which include some features from the collateralized loan obligation sector. KBRA rated its first CFO last week.
In 2020, the SEC made a move to apply a disclosure rule that had been in effect for nearly 30 years to MBS and ABS. Industry participants have been able to delay enforcement of the rule while seeking changes to the disclosure requirements.
The rating service’s proposal to notch ratings assigned by rival firms when assessing insurers didn’t sit well with the Justice Department, members of Congress and industry participants.
The SEC’s proposal on disclosure requirements and other standards for hedge funds, private equity funds and venture capital funds could have negative impacts for CLOs, SFA and others warn.
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