Ch 11 News S3 E5: Evolution in Asset-Backed Securities

Channel 11 host Ken Shinoda invites fellow DoubleLine portfolio manager Andrew Hsu to discuss asset-backed securities (ABS). ABS securitize a diverse array of non-mortgage assets, including legacy assets such as credit card, auto loan and student loan receivables, and new areas such as energy projects, transportation infrastructure and data warehousing. Mr. Hsu begins (0:57) with the growth of this sector of the fixed income universe. ABS issuance has more than doubled from $129 billion in 2008 to $293 billion in 2021. The mixture of assets funded via structured finance deals also has changed as the sector has evolved to welcome new assets such as clean-energy and data-storage infrastructure. Esoteric assets, which represented $3 billion or 2.3% of ABS issuance in 2008, accounted for $104 billion or 35.4% in 2021.
Among other issues, Messrs. Shinoda and Hsu discuss the advantages and disadvantages of ABS bond structures versus unsecured corporate bonds (6:35), the significant but underappreciated transparency of ABS (12:52), the importance of active management in ensuring an alignment of interests between ABS issuers and ABS investors (17:01), the recent bifurcation between the performance of fintech lenders’ stocks and the receivables they’ve securitized (20:41) and the three areas of growth and change in structured finance (22:44) that Mr. Hsu is tracking most closely.
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