Asset Backed Securities

As we provide lots of commentary on the maturing economic cycles and monetary policy across the globe, we thought it was worth highlighting some points from Fitch’s recently published Global Housing Update and its useful insights into how the global housing markets are faring.

As the credit cycle develops across different economies, our asset allocation changes to reflect that, and if it looks to be at a mature stage in a specific country then our natural focus on credit quality becomes more important; we are always trying to avoid next year’s problem credits, whether in the financial, corporate or securitised markets.

As most of our readers know, ABS is an asset class that lends itself well to detailed underwriting, from onsite due diligence through to cashflow and risk modelling.

The BTL sector has taken a bit of a pounding over the last couple of years, as authorities introduced a number of harsh measures to counter fears of “financial stability risks” posed by growth in lending, with concerns that future financial tightening could lead to a surge in landlords looking to exit the market should they become stressed, and subsequently cause a house price crash.  The measures included:

Way back in the summer of 2012 we wrote in our blog Picking up the PieCeS about a newly launched industry initiative to develop a set of best practice criteria for European ABS, awarding those deals that met the conditions with a label of qualification.