ABS Europeos revisitados: el cómo y el por qué

ABS Europeos revisitados: el cómo y el por qué

[Music] abs stands for an asset-backed security so literally a security backed by assets and these assets can range from residential mortgages to consumer loans all loans but typically they are consumer consumer related abs is a result of a securitization technique which basically divides the interest and principal amounts coming from the collateral pool into different tranches the most senior tranche and the typically rated will get the interest and principal paid first while the lossers are first being attributed to the lowest drugs so what you get is that the senior trance is the most risk-averse and the lowest tranche will be has the highest risk and of course the return of the senior tranche will be a lot lower than uh the return on lower trenches um i think sugarization techniques um basically is pretty key uh it really transforms a pool of illiquid assets like residential mortgages or overalls which is fairly difficult uh to take exposure in into a security that is a normal bond so it will have a rating it will have an eisen and you can trade in and out of it whenever you want it also transforms the risk reward so each investor can choose which part of the um collateral of the of the collateral pool they want to take exposure so how much return do you want and what kind of risk do you want to take and that's in a nutshell what an abs is why should you invest in abs i think there are a couple of things worth highlighting first of all consistently higher use when investing abs compared to conventional fixed income products across all ratings and all durations um that already is really attractive but second uh if you look at the loss rates it actually has been historically really really low so you're not being paid for for extra risk just looking at the last two years you can see there has been no losses due to corona at all third of all when investing in fixed income typically you take exposure to government risk or corporate risk if you invest in abs you take exposure to mostly consumer related risk that's why the correlation between abs and other fixed income products are really low so our study shows that the correlations between zero and 15 so adding abs to a broader fixed income portfolio will actually stabilize returns over longer term and i think uh last but not least one important feature is that the uh coupon of an abs is floating rate uh so unlike other fixed income products out there abs is not sensitive to rising interest rate and especially now when inflation is higher in some regions than the two percent ecb target rising interest rates are are definitely a scenario that can happen first of all at nip we have two abs funds both are full usage and have daily liquidity but they have two distinct risk profiles first we have our nnl triple abs fund and has an average rating of aaa and is much more a cash plus alternative or a alternative to government bond or or cover bond but with a positive yield a 0.2 percent yield at this time and next to that we have a pure investment grade proposition our and now european abs fund a target rating of single a right now with a yield of 1.3 so again just looking at the returns it looks really attractive next step the two funds really fit the nnip dna we believe that uh bottom of nasa's really important resulted in zero losses since we started investing in abs somewhere around the last century but at nnip we also believe that we should make use of all the data that's out there so we actually incorporated human behavior data like social media or new sentiment data and it really helps us in our risk positioning so we actually use that in a top-down process and last but not least esg integration investing with an esg angle is at the forefront at nnip we have developed scorecards for each and every sector and we scoring the transaction that we hold in our portfolio it really makes our funds interesting for investors for which esg integration is important um we at nnip are really committed to the asset class and we are considered a big play in this market we were chosen as one of the executing asset managers for the ecb aps purchase program really confirming that we punch above our weight in this asset class you


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