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2019-06-14_24_global-ABS-2019-issuers-out-in-force_teaser.jpg
TwentyFour Blog

Global ABS 2019: Issuers Out in Force

This week Asset-Backed Securities (ABS) market participants from across the globe gathered for the 23rd annual three-day Global ABS conference in Barcelona. And this year it proved more popular than ever with over 4,000 attendees (a post-crisis record) made up of issuers, arrangers, service providers, traders, analysts, market regulators, the industry press, and of course investors like ourselves. In particular, we felt the number of issuers represented was noticeably higher than we have seen in recent years.
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A fund that invests across the full range of investment grade European ABS, using the natural advantages of the asset class and a vastly experienced team to target stable, attractive returns.

Why invest?

  • ABS normally offers a higher yield for a given rating or maturity than more mainstream investments such as government or corporate bonds
  • ABS are virtually all floating rate, meaning they are naturally expected to be far less volatile than fixed rate bonds in periods when interest rates are rising
  • Built-in investor protection features such as credit enhancement, loss-absorbing reserve funds and the legal separation of issuer and asset pool
  • High transparency with transaction reports detailed enough to view the performance of each individual loan in the asset pool, enabling investors to conduct their own research
  • ABS remains a largely under-researched and poorly understood asset class, meaning those that put in the effort and expertise can be rewarded with a complexity premium

Investment Universe

The European ABS market is split broadly into four areas, though certain sub-sets of these sectors are considered important distinct products in their own right, such as Auto ABS and Credit Card ABS.

  • Residential Mortgage-Backed Securities (RMBS) are backed by pools of mortgage loans created by banks and other financial institutions. They represent the largest component of the European ABS market and are typically the most liquid
  • Consumer Receivables include a large variety of unsecured consumer debt types that have been securitized, including auto loans, credit card receivables and unsecured personal loans
  • Commercial Mortgage-Backed Securities (CMBS) are mortgage-backed securities backed by commercial rather than residential mortgages, using structures similar to other forms of ABS
  • Collateralized Loan Obligations (CLOs) are pools of corporate loans refinanced in a securitized structure, where pools can be static or actively managed by a specialist loan manager

Investment Team

A short term bond fund that targets the very best risk-adjusted returns within fixed income while keeping volatility to a minimum.

The Vontobel Fund - TwentyFour Absolute Return Credit Fund (ARC) is an actively managed short term bond fund that aims to deliver steady returns in any market environment. With strict risk parameters and a focus on short dated investment grade bonds, ARC aims to capture nearly all the returns of higher risk strategies but with a fraction of the drawdowns expected in tougher market conditions.

Why invest?

  • We aim to achieve a positive absolute return in any market environment over three years, by keeping a modest level of volatility
  • A minimum of two-thirds of the fund is invested in 0-5yr investment grade bonds, which we consider the best source of risk-adjusted returns within fixed income
  • Smaller high conviction allocations to BB rated high yield, asset-backed securities (ABS) and 6-7yr investment grade bonds
  • A strong emphasis on stock selection seeking to generate alpha and further manage risks. All bond positions must pass a rigorous screening process to show they have good return potential with low expected volatility
  • We use zero leverage or shorting, and when allocating our mix of assets we choose to avoid emerging markets and high yield bonds rated below BB (the highest rating band in HY)

Investment Team

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