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Capital Markets

Asset-backed securities: Funds list to ease first-loss sales

Structured credit investors rushing to list residual income funds need the capacity to accurately price this esoteric risk.

Michel Fryszman: Axa Michel Fryszman: Axa is taking on complex risk

The latest listed first-loss ABS investment vehicle was due to launch at the end of April, adding to the growing number of such vehicles now hoping to exploit the change in regulatory capital arbitrage treatment of these tranches. The European Equity Tranche Income Fund (EETI) joins two other recent launches – Caliber Global Investment and Queens Walk Investment – in focusing primarily on RMBS equity. To be managed by specialized structured finance investment manager Ocean Capital Partners, it will be roughly €100 million in size and be listed on London junior market AIM and Channel Islands exchange CISX. Caliber was launched in June 2005 and is managed by Cambridge Place Investment Management. Queens Walk was launched earlier this year and raised €400 million of equity capital. It is managed by Cheyne Capital Management. The first such fund to list in Europe, Fortress Investment Group’s Eurocastle Investments (which was listed in June 2004), focuses on CMBS rather than RMBS equity. Other funds that have recently listed include Washington Square’s Carador fund which focuses on CDO equity.

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