With the potential prospect of attractive yields over cash, low credit risk and favourable treatment under insurance regulation, STS securitisations could have an important role to play in liquidity portfolios, as Alastair Sewell explains.

The simple, transparent and standardised (STS) securitisation market offers significant opportunities for investors.

Yields on STS securitisations are relatively high, while their senior position in the capital structure results in lower credit risk. This benefit is compounded by the fact qualifying senior securitisations have low capital charges under insurance regulation.

This means portfolios with STS securitisation allocations can be both capital efficient and offer the potential to generate attractive returns above cash. Volumes are also meaningful, making this opportunity actionable in practical terms for investors.

Download Triangulating yield, credit and capital, where we set out some of the key considerations for investors in STS securitisations, including:

  • Understanding risks
  • Solvency II spread risk capital charges
  • Volumes and underlying assets
  • How to execute on the opportunities

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