How to invest through a securitization vehicle
To repackage assets into interest-bearing securities, they are pooled through the process of securitization. The interest payments on the original assets are paid to the investors who buy the repackaged securities.
When an institution creates a tradable financial instrument by combining or pooling different financial assets, such as several mortgages, the securitization process gets started. The issuer then offers investors this collection of repackaged assets. Securitization provides investors with many possibilities and releases funds for creators, both of whom encourage market liquidity.
It is possible to securitize any financial asset and transform it into a tradable and divisible thing with monetary worth. All securities essentially adhere to this description.
Nevertheless, mortgages and other assets that produce receivables, including consumer or commercial debt, are frequently securitized. Contractual debts like car loans and debt from credit card obligations may indeed be gathered together in this process.
What are securitization vehicles and investments?
The term “Securitization Vehicle” refers to a person to whom the company or its affiliates transfer securitization assets to accomplish securitizations, or securitization investments.
A securitization vehicle is also any subsidiary explicitly created for the purpose of buying securitized resources from the corporation and other subsidiaries in transactions that are meant to be true sales. This can be done by further selling those assets to another securitization vehicle.
Cash flows are produced by the securitization vehicle from investment returns. Then, in accordance with the cash flow produced by the underlying funds and properties that are being securitized, the securitization vehicle pays investors interests or earnings.
Securitization investment, on the other hand, is any asset that becomes tradable and can be pooled together with other investments in a single package.
Which securitization vehicles can be used?
The securitization vehicle can be set either as a business or as a management company-managed fund without legal personality. One of the formats below can be used by the securitization company:
- public limited liability company (usually labelled as S.A.);
- private limited liability company (S.ar.l.);
- common limited partnership (SCS);
- special limited partnership (SCSp);
- partnership limited by shares (SCA);
- unlimited company (SENC);
- simplified joint stock company (SAS);
- cooperative company in the form of a public limited liability company (SCSA).
You could have probably seen one or more of these abbreviations in the full name of some corporations ‒ now you know what these mean.
How to invest through a securitization vehicle?
Following these five uncomplicated steps, you can launch your exchange-traded product to the market and grow revenue from securitized assets.
Step one: a thorough research
Securitization can take place on a wide variety of assets. Therefore, examining each situation and providing a unique solution is essential.
After you get in touch with us, we thoroughly analyze and gather data to determine the best course of action.
Step two: signing the engagement letter
The risk management committee then moves on to research and assess the case after the structure is already established.
This is when the engagement letter is signed, which details the terms and circumstances and the range of the tasks to be carried out by Thales Capital Luxembourg.
Step three: structuring and paperwork review
Together with the client, our legal and operational teams create the paperwork necessary to set up the exchange-traded product. We go on to the asset’s onboarding step or designate a personal portfolio manager to do that.
The structure is concluded once the investment vehicle’s key documents have been written and reviewed.
Step four: the listing phase
Securitization of assets has become real at this point. Your investment plan is now rebranded as an exchange-traded product. Now, it is essential to move forward with the listing and make distribution easier.
The securities are also created, configured to meet your goals, and supported by an investing plan that serves as collateral. This is, however, an optional phase.
Step five: the trading process
The issue and listing of the product mark the completion of the asset securitization process. The time has come for its distribution ‒ this is also when the regulators step in, which is a completely new chapter for the product.
Investors can use their strategy through their brokerage accounts with a straightforward subscription purchase of the securities from a variety of custodians and banking systems. A series of different assets are made more accessible and globalized through asset securitization in order to attract more investors. A broker-dealer, for instance, can easily and safely expand its reach into global markets by developing an exchange-traded product that gives investors more access.