• Below, you will find details on what untapped assets are and how they can be transformed into liquid assets to optimize investment portfolios.
• The information is aimed at asset managers looking to improve the liquidity of their portfolios. 
• FlexFunds offers an asset securitization program that generates liquidity for untapped assets. For more information, feel free to contact our experts.

In a context where capital efficiency defines the competitiveness of asset managers, a significant portion of the value in many portfolios remains locked in untapped assets.

However, advances in financial structuring have made it possible to transform these resources into liquid assets through mechanisms such as securitization.

What are untapped assets and why do they represent a strategic opportunity?

In portfolio management, untapped assets are resources with potential value that remain underutilized, frequently due to low liquidity or the lack of a suitable investment vehicle.

These are illiquid assets that generate future cash flows but cannot be easily sold.

Examples of “untapped” assets include lease contracts, long-term loans or accounts receivable; unsold real estate projects; unmonetized licenses, patents or royalties; and portions of investment portfolios (stocks and bonds) with low turnover.

Efficiently managing these untapped assets is a strategic opportunity because it allows managers to optimize capital turnover and enhance the profitability of their portfolios.

By unlocking the intrinsic value of these assets (for example, through the issuance of securities backed by future cash flows), the overall efficiency of the portfolio is improved and additional financing is obtained for new projects.

The value of liquid assets in the architecture of a scalable strategy

Liquid assets are financial instruments tradable in liquid markets, capable of being bought and sold quickly without a significant impact on price.

Their role in a scalable strategy is crucial, as they enable an investment portfolio to grow and be distributed efficiently.

Through processes such as securitization, carried out by companies like FlexFunds, untapped assets can be seamlessly converted into liquid assets.

The process takes these assets and transforms them into exchange-traded products (ETPs) with their own ISIN/CUSIP code, operable from any brokerage account.

By packaging the strategy into listed securities, commercialization is significantly simplified (a single exchange purchase order rather than negotiating each asset individually), opening up global markets.

Operational and strategic advantages of structuring liquid assets

Asset securitization — transforming untapped assets into liquid assets — provides asset managers with multiple benefits:

• Liquidity and capital release: Managers gain fresh capital by converting locked assets into tradable securities. This creates liquidity for originators seeking to generate Alpha while expanding their investor reach.
• Access to global investors: Investment vehicles listed on international exchanges make it possible to attract capital beyond the local base. This allows the manager to reach private banking platforms and international funds with ease.
• Simplified trading and transparency: Converting a strategy into an ETP reduces commercialization to a simple transaction in a secondary market. Investors can see the vehicle’s net asset value (NAV) published on platforms such as Bloomberg and gain exposure to the underlying cash flows with full cost and risk transparency.
• Cost-efficient structures: By eliminating unnecessary intermediaries, securitized vehicles tend to be less expensive than conventional alternatives. For example, FlexFunds offers ETPs with structuring and maintenance costs that can, in many cases, be less than half of other industry alternatives.

Securitization: The key tool for structural conversion

Asset securitization is the financial process that enables the transition from original untapped assets to tradable liquid assets.

In simple terms, it involves regrouping the underlying assets (for example, mortgages, leases, accounts receivable and real estate projects) into a special purpose vehicle (SPV).

This SPV, typically an independent entity, issues securities backed by the cash flows or collateral of those assets.

The process works as follows: the manager selects a set of assets from their portfolio and transfers them to the SPV, legally separating them from their balance sheet. The SPV then issues a tradable security whose return and risk depend exclusively on the underlying assets.

This way, even if the originating company were to face liquidity problems or bankruptcy, the securitized assets remain isolated to back the issued instrument. 

FlexFunds and its model for issuing listed investment vehicles

FlexFunds is a company specialized in asset securitization that facilitates this process in a comprehensive manner.

Its model involves coordinating all stages from design through to the listing of the investment vehicle (ETP).

FlexFunds helps the manager package their strategy into a “Flex product” (a structured note), acting as an intermediary between the asset origination and capital markets.

The result is a bankable asset that can be traded globally. FlexFunds typically uses an Irish SPV as the issuer, developing ETPs backed by the client’s underlying portfolio.

At FlexFunds, we offer a comprehensive service: we analyze the assets, structure the ETP, coordinate service providers (custody, audit and brokers), and ensure the daily publication of the net asset value (NAV) on platforms such as Bloomberg or Six Financial.

Results in practice: Concrete benefits for managers in Latin America

Emblematic cases already exist in Latin America. Energy and infrastructure companies have securitized assets such as project accounts receivable, obtaining financing for greenfield developments.

For example, S&P highlights that these structures have made it possible to finance roads, metro lines, and power plants with future cash flows, “providing a platform to access investors in international debt markets, required for issuances that may be too large for any domestic market in the region”.

Thanks to securitization, these projects have diversified their financing sources and attracted foreign capital in a context where local credit is limited.

In summary, the practical advantages are: 

• Immediate liquidity: accessing fresh capital without selling the business, simply by issuing the vehicle.
• Diversification of sources: financing through not just local banks, but also via international investors.
• Strategy scaling: reaching a global investor base and, as a result, growing the assets under management.

To learn more about FlexFunds products, feel free to contact our executives. We will be glad to help.

Sources:

• https://www.ebc.com/forex/asset-securitisation-s-definition-and-benefits
• https://flexfunds.com/solutions/how-to-coordinate-asset-securitization-process-with-flexfunds/
• https://www.flexfunds.com/solutions/asset-securitization-which-assets-can-be-securitized/
• https://www.comparables.ai/articles/unveiling-hidden-potentials-uncovering-undervalued-assets-in-company-valuations