Scrutiny essential on ABS

investors without means urged to avoid asset backed securities because of their complexity

Investors without the resources to perform diligent scrutiny of asset-backed securities (ABS) should beware buying these complex instruments, fund managers warn. ABS are bonds issued by specially set up special purpose vehicles (SPV). In contrast to conventional capital market securities such as corporate bonds, these SPVs are backed by a pool of discrete assets, rather than just the general obligation of a bank or company. ABS pools can hold a variety of assets that generate a set of future cashflows. In recent years, the range of assets has expanded to include pubs, hospitals, gate rece...