Esoteric or non-traditional assets continue to gain momentum by claiming a bigger piece of the securitization market.
As the ABS industry gets comfortable with what was once unusual, esoteric bankers are ready to push the boundaries with new asset classes within the space.
According to KGS-Alpha Capital Markets' review of data published by Moody's Investors Service, 2003 had $505 billion of ABS issued with the market share for esoteric or "other" assets comprising 8.7%.
Fast forward to 2011, though the pie itself has become much smaller — according to the research by KGS-Alpha, the market shrank to about $89.5 billion from $505 billion year-to-date — the esoteric category is a much bigger piece of the pie as it accounts for about 26.5%.
Year-to-date this year, there has been over $10 billion (September saw three esoterics transactions in stranded costs, fleet leasing and premium finance totaling over $500 million) of esoteric issuance done in the 144A markets.
"The overall pie has shrunk but there is still a lot of liquidity in the ABS marketplace and much of that is going into esoterics," said Fouad Onbargi, head of origination and investment banking at KGS-Alpha. "People have seen these deals and they have proven themselves so it's become a much bigger piece of the pie,"