FlexFunds takes all the necessary steps to make unique and innovative ETPs available to fund managers. Thanks to these investment vehicles, asset managers and financial advisors can expand their clients’ range of products.
In this article, we explain step-by-step the process of asset securitization, one of the most widely used methods of setup investment vehicles (ETPs).
What is asset securitization?
Asset securitization is nothing more than a process of transformation of any financial asset into a negotiable security.
Securitization can be carried out with several objectives in mind, one of the most common of which is to provide a flexible structure to the investment strategy, making it easier to distribute to underwriters.
It may also be that the underlying asset is illiquid (such as real estate), and securitization is intended to provide greater liquidity.
FlexFunds specializes in setting customized ETPs through this process, whatever the objective and the assets to be securitized.
We have more than 10 years of expertise in this activity. During this time, we have issued more than 250 investment vehicles for more than 200 clients worldwide. Our mission is to offer you a quality ETP at a competitive cost that can be launched in the shortest possible time and reach the most significant possible number of investors.
What assets can be securitized?
Thanks to FlexFunds’ solutions, these investment vehicles can repackage different types of assets as a liquid, alternative, or listed at the custodian of your choice:
- Liquid assets: stocks, bonds, ETFs, mutual funds, options, futures, and Forex.
- Alternative assets: real estate investment trusts, private investment funds, hedge funds, and private loans.
What is the asset securitization process like?
The asset securitization process is simple for the FlexFunds client. All you have to do is decide which asset or groups of assets will act as the underlying to securitize and contact one of our representatives.
FlexFunds takes care of the ETP issuance process, corporate administration, and fund accounting services.
In just 5 simple steps, you can bring your ETP to market and facilitate access to investors in the global capital markets.
Step 1. Customized study and design of the ETP
Because securitization can occur on many assets of different nature (both publicly listed in secondary markets and private), it is necessary to analyze each case and offer a custom-designed solution.
After contacting FlexFunds, a detailed study and data collection are carried out to establish the best possible strategy.
FlexFunds works with recognized international service providers to coordinate the process of creating and issuing the ETP best suited to your needs.
Step 2. Due Diligence and signing of the Engagement Letter
Once the product structure has been defined, the risk committee proceeds to study and evaluate the case.
Subsequently, the Engagement Letter is signed: the contract specifying the terms and conditions and the scope of the functions to be performed by FlexFunds.
Step 3. ETP structuring and document review
Our legal and operations teams work hand in hand with the client to draft the documentation to structure the ETP. We proceed to the onboarding phase of the asset or Portfolio Manager takes place.
The structuring is completed once the essential documents of the investment vehicle, such as the Series Memorandum, Constituting Instrument, and Portfolio Management Agreement, are drafted and reviewed.
Step 4. Issuance and listing of the ETP
Asset securitization is now a reality. At this point, your investment strategy is repackaged in an ETP. It is now necessary to proceed with its listing and generate an ISIN/CUSIP facilitating its distribution.
The securities are issued by the Irish Special Purpose Vehicle (SPV) set up for this objective and are backed by the investment strategy, which acts as collateral.
Step 5. The ETP is ready for trading through Euroclear
The asset securitization process ends with the issuance and listing of the ETP. Now it is ready for distribution.
Investors can access their strategy with a simple subscription transaction of the securities in Euroclear through their brokerage accounts from many custodians and Private Banking platforms. Asset securitization involves making a series of assets more accessible and internationalized to reach additional investors. It is a safe and straightforward way for a broker-dealer, for example, to open its doors to international markets with the creation of the ETP and provide greater access to investors.
Example of asset securitization
A company in the Real Estate sector has as a business objective to reach a more significant number of investors.
To do so, it decides to put together a series of real estate assets in a portfolio: residential or office buildings and to create a Flex.
Thanks to this investment vehicle, it will be able to break down borders by improving the distribution of the investment strategy in the different international private banking platforms.
What solutions does FlexFunds offer for asset securitization?
As previously mentioned, FlexFunds is a leading provider in the setup and launch of investment vehicles that offer one of the most advanced asset securitization programs, improving the distribution of investment strategies and facilitating access to international investors.
FlexFunds’ solutions include:
- FlexPortfolio: an unregulated ETP securitizes listed, liquid assets, such as stocks, bonds, options, Forex, futures, and ETFs.
- FlexFeeder: an unregulated investment vehicle that securitizes alternative assets and fund shares, such as private equity funds, real estate investment trusts, or hedge funds.
- Flex Private Program: Provides large customers with the administration of their bespoke issuer of exchange-traded products, allowing for increased flexibility and customization.
The time to market for these ETPs is half that of other alternatives in the market. FlexFunds ETPs will allow you to have a unique ISIN code distributable through Euroclear.
If you want to know more about the asset securitization process and how you can benefit from it, please get in touch with our team.