- This article outlines which assets can be securitized and how the process turns assets into tradable products that offer liquidity and easier access to the market.
- For portfolio managers, financial advisors, and institutional investors interested in diversifying their funding strategies through securitized investment vehicles.
- FlexFunds offers a turnkey asset securitization program, supported by renowned service providers, that guides every phase from structuring to listing. Contact us to discover how we can help securitize your assets efficiently.
Which Assets to Securitize
Understanding asset securitization and identifying which assets can be securitized are key to expanding your investment strategies and unlocking new funding opportunities. Moreover, they provide a framework for turning diverse financial resources into more liquid, tradable instruments.
By transforming existing or future assets into securitized products, issuers gain access to capital markets efficiently and with greater flexibility. In addition, this process can lower funding costs and open doors to investors who might otherwise overlook these asset classes.
With the global rise of securitized assets, thereâs never been a better time to invest.
The global asset securitization market is projected to rise from approximately USD 3.5 trillion in 2023 to USD 6.8 trillion by 2032, with a CAGR of 7.8%.
What Does It Mean for an Asset to Be Securitizable
Asset securitization is the process of converting a pool of assets, ranging from loans to intellectual property, into securitized assets that can be traded or listed.
These instruments, known as securitized products, are backed by the income or value of the underlying assets. As a result, investors gain exposure to diversified revenue streams rather than a single asset.
In simpler terms, securitization transforms non-liquid holdings into marketable securities. Therefore, this allows businesses, portfolio managers, and fund advisors to raise capital, manage risk, and broaden their investor base.
An asset becomes âsecuritizableâ when it generates predictable and measurable cash flows or when its underlying value can be independently verified.
Examples include rental income, loan repayments, or royalty streams. Assets that demonstrate these characteristics are strong candidates for securitization because they provide transparency and confidence to investors.
When evaluating what securitized products are, itâs important to remember they are not limited to traditional financial assets. Any asset with reliable and quantifiable income potential can be securitized; therefore, it is highly adaptable for both institutional and private issues.
Types of Securitizable Assets
One of the most attractive qualities of this financial procedure is that multiple asset classes can be securitized in an agile and efficient manner.
- Equity: Public or private shares can be securitized, giving issuers a way to access liquidity or capital markets without selling equity directly.
- Bonds: Fixed-income securities can also be securitized. In this case, the backing is in the future cash flows that will be distributed periodically.
- Commodities: Commodities can also be the subject of the asset securitization process. Thus, gold, silver, oil, and soybeans, among others, can be securitizedÂ
- Derivatives: Financial derivatives such as futures and options, which, in turn, have other underlying assets, are considered suitable for this procedure.
- Foreign Exchange: Currency pairs such as euro-dollar, pound-real, dollar-yuan, etc., also qualify as securitized assets, which helps their direct investment.
- Investment Funds: Investment funds and hedge funds managed by portfolio and hedge fund managers can be converted into securitized assets through the same procedure.
- Real Estate Projects: Among the illiquid assets, you can securitize industrial, residential, or commercial real estate projects. In these cases, rents are among the primary sources of cash flow, discounted to present value to determine the value of the securitized assets.
- Loans and Contracts: Contracts between parties and loans between legal entities are other assets that can be securitized through structuring companies such as FlexFunds.
- Intellectual Property: Ultimately, intellectual property, despite being an intangible asset, can be securitized similarly to other assets. The economic flow will be all expected future royalties.
Process of Identifying and Evaluating Assets for Securitization
Identifying and evaluating assets for securitization requires a careful, step-by-step approach.
The success of any asset securitization project depends on the assetâs stability, transparency, and market appeal.
First, itâs important to assess cash-flow reliability; assets with predictable income, such as leases or royalties, are the best candidates.
Next, evaluating liquidity and transparency ensures the asset can be easily valued and verified, which simplifies the securitization process.
Understanding risk and market correlation follows, as this helps design a structure that balances return with stability.
Equally vital is gauging investor demand, and ensuring the securitized product aligns with investor goals, whether focused on yield, consistency, or specific themes like ESG or real estate.
Finally, with expert guidance from FlexFunds, issuers can structure and distribute the securitized product efficiently to institutional investors.
How to Securitize Assets with FlexFunds?
Fortunately, the asset securitization process with FlexFunds is simple. It can be done in just five steps:
Step 1: Custom Study and ETP Design
First, you should schedule a meeting to discuss your specific situation so that we can provide a solution tailored to your stated objectives and needs.
Step 2: Due Diligence and Engagement Letter Signing
Set up the necessary accounts, documentation, and asset management workflows, including signing the engagement letter, which specifies the terms and conditions of service and the scope of functions FlexFunds will perform.
Step 3: ETP Structuring and Document Review
Secondly, the portfolio manager defines the strategy and its terms and conditions. At FlexFunds, we ensure the securitized asset (ETP) is structured to the highest industry standards, making it an efficient investment vehicle for investors.
Step 4: ETP Issuance and Listing
When the prospectus or memorandum is ready and reviewed by all the providers involved in the structure, the securitized asset (ETP) is issued, generating an ISIN/CUSIP code that facilitates the subscription of the ETP and access from brokerage accounts in international private banking.
This model allows issuers to bring assets to market quickly and with minimal administrative burden, thereby transforming complex holdings into efficient securitized assets that can be distributed globally.
Step 5. ETP Ready for Trading Via Euroclear
The asset securitization process ends with the issuance and listing of an ETP, making it ready for distribution. Its purpose is to turn different types of assets into accessible, tradable instruments that can reach a wider, international investor base.
Thanks to FlexFundsâ solutions, you can access investment vehicles that securitize multiple asset classes: liquid, listed, and alternative, thus expanding your investment possibilities.
FlexFunds stands out by offering a fast, end-to-end asset securitization program that manages every phase efficiently through a turnkey approach.
The program is supported by leading partners such as Bank of New York, Interactive Brokers, Apex, Bloomberg and Morningstar, which reinforces its reliability and global reach.
To learn more about our securitization solutions, do not hesitate to visit our FlexPortfolio section.
Ready to transform your assets into marketable securities? Contact us today to learn how FlexFunds can simplify your securitization process.
Sources:
- https://dataintelo.com/report/asset-securitization-market
- https://www.investopedia.com/ask/answers/07/securitization.asp#:~:text=Common%20Assets%20in%20Securitization,flows%20(like%20toll%20road%20receipts)
