Private Equity ABS Draws Maturing Investor

The throttling down of the capital markets has resulted in a financial picture painted not just with diminished portfolio value but uneasiness in determining when value can – if ever – be extracted from limited partner arrangements.

The complex and esoteric world of asset-backed securitization (ABS) has been touted as a remedy for ailing private equity investors. Collateralized debt obligations (CDOs) are ABS vehicles that have the ability to package the risk associated with future cash flow from an investment, in this case future receivables expected from a LP investment, and sell it to ABS investors. The result is an exit strategy for the private equity investor, albeit at an extreme discount, and although complex to arrange the cord to a cumbersome investment is effectively cut.

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