The boom in ABS may be causing some European investors into rushed decisions, Standard & Poor's analysts said last week. In the haste to include ABS in their portfolios, many portfolio managers have abandoned a through credit analysis and are increasingly dependent on ratings, in some cases, as the sole investment decision-making factor.
Market fundamentals have taken a back seat in influencing ABS spreads and investors in senior paper often see a triple-A rating as a passport to invest, forgoing any fundamental analysis, S&P analysts said in a report published last week. "The high demand for ABS has led to a dramatic shortening of the time investors have to make their investment decision. This has been instigated by the influx of the new breed of investors, whose buy-and-trade attitude makes them more aggressive in their decision making," said Managing Director Ian Bell, of the European structured finance group in the report. "Traditional investors, who typically have a buy-and-hold brief, are being forced to follow suit, with the result that the time-consuming and costly fundamental analysis is, in many cases, not being done."