Devils Still Lurking In ABS Market
http://www.SecuritizationIntelligence.com/MobileArticle.aspx?PageID=200177&ArticleID=2918842
18 October 2011
Securitization Intelligence
Joy Wiltermuth
The asset-backed securitization market is at risk of becoming obsolete if it does not grow its investor base and repair damage done in its heyday, Bob Behal, principal, co-head ABS/CMBS investments at Vanguard Group, said during this morning's opening panel at the ABS East conference in Miami.
"How many investors here plan to put money into the sector?" Behal asked attendees at the Charting the Future of the Securitization Market: The Devil's in the Details full session. Only about a handful raised their hands. "There are just not enough of us out there," he said in response.
But even if some potential buyers spent their morning elsewhere, the market still has other demons to tackle before it comes back as a major force, according to Sean Dobson, ceo and chairman at Amherst Securities Group. He pointed to major structural issues that have yet to be repaired. "We really need to clean up the mess we've made," he said, speaking to legacy overhang issues.
To that end, Dobson envisions the industry's future as a more sustainable one. "Securitization needs to be a way to fund an existing credit, not a credit producing machine, which is where I think the train left the tracks," he said.
Adam Siegel, co-head of asset-, residential- and mortgage-backed securities trading for the Americas at the Royal Bank of Scotland, agreed. "I think the world needs securitization," he said, "But [the future is] its term financing in a box. That's how you are going to solve some of the problems."
Whatever shape it takes, the sector's future is not expected to include the much-maligned subprime ABS collateralized debt obligation. "I don't think we'll ever see ABS CDOs again," said Reed Auerbach, partner at Bingham McCutchen. He pointed to a combination of a slow economy and attractive, alternative funding options as the major factors holding back new-issuance.
RBS' Siegel agreed. "We are not talking about will housing be up or down," he said. "We are talking about countries [in the Euro zone] defaulting." |
