Securitization greatly interests me. But everyone I speak with tells me this industry is in the pits of the pits.
Looking forward, where is there going to be growth in this area? Will it ever pick up, or is it effectively dead in terms of growth?
Also, for people who career change in to securitization, where do they typically come from in the banks?
Regards
It's not in the pits.
Certain segments are (mortgages come to mind), are not doing so hot. Even so, it still makes sense from a debt perspective of a lender to sell their risk off to a larger company who will securitize and sell tranches. (IE, car loans, CLOs)
It will absolutely pick up. Here's the thing: Securitization has been around since the 70's - but most didn't realize it because it wasn't something talked about in everyday conversation. When securities cause America to explode in 2008 - it became very much popular to talk about.
As long as you have agency and non agency mortgages, credit cards, student loans, auto loans, tankers, aircraft, and yes commercial properties even despite the condition of the CMBX indices there will be securitization on Wall St. I doubt securitization as a % of total revenues will ever return to 07 levels but it will pick back up.
http://www.markit.com/en/products/data/indices/structured-finance-indic…?
I think securitization will pick back up for 2 reasons. With low rates and yield bogeys institutions need yield. Structure enables people to get that yield. Think about it you can't create a AAA tranche without creating other tranches that are exposed to losses first but also offer higher yield.
Conversely, with Basel III and other measures coming down the pipeline that require banks to hold more capital I expect things like re-remics will increase in issuance because they can be used to free up capital. Re-remics take previously written down AAA tranche/s (the same bonds that traded cents/dollar in 08-09 and had junk ratings) re-package them with lower rated first loss tranches carved out. That enables these newly enhanced bonds to get a solid investment rating. Sounds silly, yes, but banks have to hold less capital against an investment grade bond than they would against a junk bond. This capital can be put to other productive uses. Lastly Investment grade bonds as opposed to junk bonds will reduce a bank's risk weighted assets. That moves to increase the all important bank's Tier 1 capital ratio.
http://online.wsj.com/article/SB125434502953253695.html
I think securitization will be around in one way or another because in this low/weird rate environment there are natural buyers for both the top and bottom parts of deals.
It's here to stay.
Can anyone comment on hours, pay, and lifestyle of securitization analysts?
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