NEW DIRECTIONS IN INVESTMENT FINANCE
Structural Challenges and Market Shift
Global issuance of collateralised debt obligations and synthetic
equivalents in 2007 reached US$269 billion but by the end of 2008
had dropped to US$71 billion (source: Creditflux). Recent
market activity suggests that a growing number of investment
finance vehicles are being structured not as CDOs issuing rated
debt, but as hybrid investment funds. A combination of the various
factors summarised below is expected to result in permanent changes
to the structure of the investment capital markets.
Financial Crisis
International capital markets have become impaired as a result
of the global financial crisis, with entire market sectors
effectively closed for lack of investor interest (e.g. RMBS).
Current issuance volumes for repo purposes with the Federal
Reserve, European Central Bank and Bank of England are not
considered sustainable beyond a short-term support period.
