- Below, we detail the benefits of asset securitization and exactly how it works.
- This information is aimed at fund managers looking to optimize their investment strategies through securitization.
- FlexFunds offers an asset securitization program to develop exchange-traded products (ETPs). For more information, feel free to contact our experts.
Currently, fund managers—regardless of how much capital they oversee—have at their disposal a vast array of mechanisms to reach a broader client base and create diversified strategies. Among the most innovative is asset securitization.
What is asset securitization?
Specifically, asset securitization is a process that converts a basket of assets into exchange-traded products (ETPs).
The new securities, known as bankable assets, have their own ISIN/CUSIP codes and can be distributed more easily across different financial platforms.
What’s interesting about securitization is its compatibility with a wide variety of assets.
That is, you can securitize stocks, bonds, commodities, financial derivatives, real estate, investment funds, hedge funds, loans, and much more.
“Securitization was initially used to finance simple, self-liquidating assets such as mortgages. But any type of asset with a stable cash flow can in principle be structured into a reference portfolio that supports securitized debt,” the International Monetary Fund (IMF) explains.
Organizationally, specialist firms like FlexFunds take these assets and issue the ETPs that use the cash flows as collateral.
Why is it important?
Asset securitization is very important for fund managers because it offers three clear benefits.
Diversification
Through asset securitization, fund managers can build and offer strategies with proper diversification.
Since ETPs can be based on different types of assets from various countries, they can mix what’s needed to reduce volatility and meet performance objectives.
As J.P. Morgan explains, “building a resilient portfolio requires diverse assets and broader geographical diversification.”
Liquidity
On the other hand, securitization allows the creation of tradable securities with high liquidity—even if their underlying assets are illiquid.
For example, one such security could be based on a real estate project or a mortgage loan. This way, the owner of those assets gains liquidity, and the fund manager can offer exposure to them via the exchange.
Broader client base
At the same time, by offering diversified, liquid strategies packaged into exchange-traded products, fund managers can reach a wider client base.
Investors can purchase the ETPs easily through Euroclear, using their brokerage accounts from various custodians and private banking platforms.
For these reasons, the market for asset-backed securities developed via securitization continues to grow. In fact, according to a report by Global Market Insights, it’s estimated to expand at a compound annual growth rate of 8% until 2032, reaching USD 2.4 trillion.
How to securitize assets?
Fortunately, the asset securitization process with FlexFunds is very straightforward, consisting of just five steps.
1. Tailored assessment and ETP design
We begin with a detailed analysis to offer a solution designed specifically for the client’s needs and objectives, working with recognized international providers, including Bank of New York, Interactive Brokers, Bloomberg, Morningstar, among others.
2. Due diligence and engagement letter signing
Our risk committee evaluates the product structure and we sign the engagement letter, the contract that outlines the service terms and the roles FlexFunds will play.
3. ETP structuring and documentation review
We then work closely with the client to develop the essential documentation that will form the ETP, including the appointment of the portfolio manager.
4. ETP issuance and listing
Once structured, the investment strategy becomes a listing-ready ETP, issued by an Irish special purpose vehicle (SPV).
5. Ready to trade via Euroclear
Finally, the exchange-listed product developed through that asset securitization process is ready to trade.
Investors can easily access it by buying the securities through Euroclear, via a broad range of custodians and private banking platforms.
It’s worth noting that at FlexFunds we provide high-quality, cost-efficient, and tailored ETPs, accompanied by a comprehensive service that includes:
- Exchange listing
- Fund accounting
- Back-office services
- Net Asset Value (NAV) calculation
- Corporate administration
To learn more about FlexFunds and its listed products, remember that you can contact our team of experts. We’ll be glad to assist you!
Sources:
- https://www.imf.org/external/pubs/ft/fandd/2008/09/pdf/basics.pdf
- https://am.jpmorgan.com/kr/en/asset-management/institutional/insights/market-insights/market-updates/bulletins/market-outlook-2025/the-importance-of-diversification-amid-portfolio-construction/
- https://www.gminsights.com/industry-analysis/asset-backed-securities-market
