A significant number of fund managers in Europe are starting to buy asset-backed securities, and researchers at BNP Paribas predict the increasing demand will keep spreads tight.
To help quantify the impact of new investors, BNP Paribas included questions about ABS and CDO investments in its most recent quarterly fixed-income survey. "We now have our first concrete insights into this piece of the demand-side puzzle," BNP researchers wrote in the report.
Of 127 respondents to the credit section, 28% had increased their ABS investments from the previous year, and 17% had increased their CDO investments. In addition, 73% expect to increase their ABS allocation over the next three months, and 61% plan to do the same for CDOs.
"These numbers are dramatic," the report said, describing the results as "highly instructive" particularly because the survey targets asset managers. The traditional investor base for European ABS is mainly bank treasury departments, which favor a buy-and-hold strategy, the report noted.
"The fact that over 60% of active asset managers are expecting to increase their holdings of ABS and CDOs, and that a significant number of them have done so in the past year, is a clear indication of new sources of demand," the researchers wrote.