Asset-backed securities have become a mainstream product, attracting an increasingly large investor base. They offer investors attractive opportunities to enhance their portfolio's risk/return profile.

Asset-backed securities consist in the packaging of generally non tradable similar assets, such as loans or mortgages, into tradable instruments meeting different risk profiles. The originator, typically a bank, is the initial owner of the assets.  The assets are sold to a specific entity set up for this unique objective. This entity then refinances the assets by issuing bonds or notes backed by the asset pool.

This allows investors to diversify their investments since ABS open the door to investing in otherwise non tradable assets. They offer attractive spreads, stable ratings and have proven excellent performances. They can therefore be seen as a high quality alternative to covered bonds, financials and corporates.

Depending on the structure of the ABS and the characteristics of the underlying assets, the principal will be reimbursed either at maturity (bullet ABS), or by instalments (amortising ABS).

The main advantage of ABS is that they are typically highly rated instruments that offer more attractive spreads than similarly rated corporate bonds : over 80% of ABS issued have a triple-A rating.

In the asset-backed market, Fortis is a very well-known player : it has been investing, trading and underwriting all kinds of euro and USD ABS for over 10 years.