There was a significant rise in European investor interest in monoline wrapped asset-backed securities this year, said specialists in the industry.
"European investors find it attractive to purchase wrapped deals because they can more efficiently understand and be comfortable with taking the risk as a guarantor, as compared to a long list of factors one needs to look at in deals that are not guaranteed," said Charlie Williams managing director of fixed income investor relations at MBIA. The straight-forward nature of wrapped deals becomes more attractive because many European firms don't have the staff and the resident expertise to understand the spectrum of risk involved in an unwrapped asset-backed deal.
In addition, with the introduction of the Euro, investors are not as concerned with foreign currency risk. This has resulted in European investors looking into the fixed-income market for high triple-A quality investments with attractive yields. "The obvious answer is structured asset-backed deals," Williams said. The influx of European interest in wrapped asset-backed securities is part of a growing trend towards globalization.
"We're all expanding in the structured and financial areas," he said. He points to the increase in European interest in the monoline industry in particular, and to the growing investment possibilities in other parts of the of world, specifically in Japan. Earlier this year, the joint venture between MBIA and Ambac has built international offices in Japan.