Asset-Backed Securities (ABS)

TwentyFour’s ABS funds cover the whole risk spectrum available, from enhanced cash to direct asset-backed lending. The breadth and size of what we manage enables us to leverage our relationship with both issuers and banks, which can offer potentially material benefits in yield and structuring for the investors in our strategies.  

Key members of the TwentyFour team are regarded as pioneers in European ABS, having been involved in the market since its first securitisations in the late 1980s. The team regularly advises European policymakers and is heavily involved in guiding the path for regulation in this sector. Accordingly, TwentyFour is one of Europe’s leading ABS managers.

Funds

5 funds available
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Asset Backed Opportunities Fund
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Asset-Backed Securities
Share class Currency ISIN Valor NAV YTD As at
I Inc GBP GB00BD5D3D88 0.99 8.44% 17 Jul 2024
Monument Bond Fund
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Asset-Backed Securities
Share class Currency ISIN Valor NAV YTD As at
A acc (Net) GBP GB00B3VH8W86 15.31 4.68% 17 Jul 2024
I Acc (Gross) GBP GB00B4XMPS34 167.50 4.94% 17 Jul 2024
I Acc (Net) GBP GB00B3V5V897 161.51 4.94% 17 Jul 2024
I Inc (Gross) GBP GB00B4XCQT18 113.47 4.94% 17 Jul 2024
I Inc (Net) GBP GB00B3XVTT21 113.44 4.93% 17 Jul 2024
L Acc (Gross) GBP GB00BDD9NJ41 1.26 5.08% 17 Jul 2024
L Acc (Net) GBP GB00BDD9NG10 1.33 5.07% 17 Jul 2024
L Inc (Gross) GBP GB00BDD9NH27 1.05 5.07% 17 Jul 2024
L Inc (Net) GBP GB00BDD9NF03 1.08 5.07% 17 Jul 2024
TwentyFour Income Fund
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Asset-Backed Securities
Share class Currency ISIN Valor NAV YTD As at
Ordinary Share Class GBP GG00B90J5Z95 110.18 10.46% 12 Jul 2024
TwentyFour Sustainable Enhanced Income ABS Fund
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Asset-Backed Securities
Share class Currency ISIN Valor NAV YTD As at
A ACC CHF CHF IE000N38Y625 111.52 5.10% 12 Jul 2024
A Acc GBP IE00BMX0BH45 126.09 7.26% 12 Jul 2024
A Inc GBP IE00BMX0BJ68 108.31 7.25% 12 Jul 2024
Asset-Backed Securities
Share class Currency ISIN Valor NAV YTD As at
A EUR LU1882612564 43753862 100.27 4.18% 17 Jul 2024
AHI (hedged) GBP LU2388185246 113723386 107.66 5.11% 17 Jul 2024
AQHG (hedged) GBP LU2388185089 113724408 104.15 5.22% 17 Jul 2024
AQHNG (hedged) GBP LU2388184868 113723425 112.77 5.29% 17 Jul 2024
HG (hedged) GBP LU2388185162 113724426 112.39 5.27% 17 Jul 2024
HI (hedged) USD LU1602256700 36484869 127.88 5.29% 17 Jul 2024
HI (hedged) GBP LU2388185329 113723424 112.05 5.20% 17 Jul 2024
HI (hedged) CHF LU1602256296 36484864 106.07 3.00% 17 Jul 2024
HN (hedged) GBP LU1882613372 43753896 117.07 5.17% 17 Jul 2024
HN (hedged) CHF LU1882613299 43753894 104.94 2.99% 17 Jul 2024
HNG (hedged) GBP LU2388184942 113724188 112.78 5.30% 17 Jul 2024
I EUR LU1602255561 36484858 112.81 4.48% 17 Jul 2024
N EUR LU1882613026 43753879 110.56 4.46% 17 Jul 2024

What are Asset-Backed Securities?

Asset-Backed Securities (ABS) are a type of bond, typically issued by banks or other lenders.

What makes ABS different to other parts of fixed income, such as government or corporate bonds, is that they are ‘secured’ against a specially designed pool of loans with similar characteristics.

This collateral pool will typically contain thousands of high-quality loans such as mortgages, and the repayments on those assets are directed straight to investors in the bonds.

This is where the phrase ‘securitisation’ comes from – investors’ coupons are secured by the cash flowing from the regular interest and principal paid on the assets included in the pool.

  • Asset : Thousands of assets with regular repayments and similar characteristics, such as mortgages or car loans, are pooled together.
  • Backed : The company issuing the ABS sets up a legally separated Special Purpose Vehicle (SPV), which purchases the asset pool. The bonds investors buy are backed by the interest and principal proceeds from the asset pool. This means bondholders’ exposure is to the assets themselves rather than the seller of those assets; in an RMBS, for example, investors have exposure to the mortgages but not the bank that made those loans to customers.
  • Securities : The company sells bonds – or securities – via the SPV to investors, who are paid directly from the repayments on the assets in the pool.

At first glance, the ABS market can look like a confusing mix of acronyms (RMBS, CLOs, Auto ABS) but they simply identify the assets backing the bonds – residential mortgages, senior secured corporate loans, auto loans.

ABS at a glance

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 extended by banks and other financial institutions. They represent the largest component of the European ABS market and they are also the most liquid. RMBS itself includes sub-categories such as Prime, Non-conforming and Buy-to-Let RMBS, broadly defined by the typical profile of borrower in the pool.
  • Consumer Receivables (Consumer ABS) ) include a large variety of unsecured consumer debt types that have been securitised including auto loans, credit card receivables and unsecured personal loans.
  • Commercial Mortgage-Backed Securities (CMBS) are backed by commercial mortgages rather than residential mortgages, and use structures similar to other forms of ABS.
  • Collateralised Loan Obligations (CLOs) are pools of corporate loans, refinanced in a securitised structure. Pools can be static or actively managed by a specialist loan manager.
European ABS Market Overview

Why invest?

 

Higher yield

ABS normally offers a higher yield for a given rating or maturity than more mainstream investments such as government or corporate bonds

Less volatile

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 volatile

Investor protection

Built-in features such as credit enhancement, loss-absorbing reserve funds and the legal separation of issuer and asset pool, intended to provide a level of investor protection

 

High transparency

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

Complexity premium

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 speciality premium

Meet the team

 

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