CMBS vs RMBS vs other ABS
I wonder if people have thoughts on which area of ABS trading and finance is more promising for the beginning of a career, between RMBS or CMBS? Or even other ABS areas like credit cards, auto, other stuff? Thanks!
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Ah, the world of Asset-Backed Securities (ABS)! It's a fascinating field with many different areas to explore. When it comes to Residential Mortgage-Backed Securities (RMBS) and Commercial Mortgage-Backed Securities (CMBS), both have their own unique aspects and opportunities.
RMBS are generally considered safer as they're backed by residential properties. However, as we've seen in the past, they're not always safe and the risk can sometimes be a toss-up. On the other hand, CMBS, backed by commercial properties, are often viewed as riskier. But sometimes, they can be much safer than residential loans.
Other areas of ABS like credit cards, auto loans, and consumer loans also have their own risk profiles. For instance, a loan for a sub-prime auto might carry a 15% or 20% rate due to the higher risk and lower residual value of the auto itself.
As for which area is more promising for the beginning of a career, it really depends on your interests and career goals. Each area offers different experiences and learning opportunities. If you're interested in a more stable area, RMBS might be a good fit. If you're interested in taking on more risk and potentially earning higher returns, CMBS or other ABS areas might be more suitable.
Remember, banks usually like to diversify their lending mix, and the same can be said for your career. Gaining experience in different areas can provide a well-rounded foundation for your career in finance. Good luck!
Sources: Thoughts on Goldman vs Lending Club, Role of Quants in Credit Investing/ Trading: ABS, Structured Credit, Corporate Loans, Teach For America vs BB ABS role for future MBA?, Securitized Products - RMBS, CMBS
Depends where you wanna go to be fair. If you wanna gain skills for PERE, do RMBS and CMBS. If you want to do something more exotic do ABS. The thing is, ABS (as I see it) is a security backed by pretty much any collateral that doesn’t fall in the other 2 categories. With that said, you might learn about different industries / sectors whereas in the other 2 you will be focussed on RE.
Also, what I said above depends on the type of job. It’s very different if you are doing equity research on these instruments compared to (e.g.) doing rating surveillance at Moody’s/S&P.
How easy/hard is it to transfer between RMBS and CMBS? And also how hard would it be to transfer from either one of these groups to an repe or debt fund?
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