Income Asset Management (IAM) has launched a new asset backed securities (ABS) and residential mortgage-backed securities (RMBS) product, ABS-RMBS Direct, offering investors direct access to this income-generating asset class, and has also appointed industry veteran Tony Perkins as head of structured and asset backed securities to lead the initiative.
“With the launch of ABS-RMBS Direct we are further expanding the range of investment solutions we offer to our clients,” said IAM Co-Head of Capital Markets Kyle Lambert.
“This launch reflects our commitment to providing access to diversified investment opportunities that deliver strong risk-adjusted returns for Australians. With the addition of Tony Perkins and his extensive expertise in structured finance and asset-backed securities to the team, we believe this new product will deliver significant value to investors,” he said.
ABS and RMBS are investment products backed by a pool of receivables such as auto loans or mortgages. These securities offer investors regular income across a range of risk and return profiles depending on the underlying receivables and their position in the capital structure.
Mr Perkins brings over three decades of experience in the financial services industry to the new role, specialising in structured finance, asset-backed securities, and debt capital markets. He has held senior leadership roles at prominent institutions such as UBS Investment Bank and Bluestone Home Loans and was most recently a partner in corporate advisory at Prime Financial Group.
“Mr Perkins’ expertise in originating, structuring, and managing asset-backed securities will be instrumental in ensuring the success of IAM’s RMBS offering,” said Mr Lambert.
Mr Perkins said joining IAM and leading the development of ABS-RMBS Direct, allows for the launch of an investment class which will pay relatively high yields to investors.
“This is a significant opportunity to provide investors with access to a robust asset class with very attractive risk-return characteristics. IAM is committed to providing its clients with the knowledge and tools necessary to make informed investment decisions in the RMBS market,” he said.
“For those investors wanting higher yield, and with a higher risk appetite, yields range from a spread over the bank bill swap rate of 2.5 percentage points up to a spread of 6 percentage points. Over decades in Australia, even the highest yielding ABS and RMBS have virtually never lost investors a cent,” Mr Perkins said.
The global asset-backed securities market, which includes ABS and RMBS, is a substantial investment sector. S&P Global Ratings forecasts a global issuance volume of approximately US$1 trillion over 2024.
In Australia, the ABS and RMBS markets play a crucial role in funding financial receivables, with an outstanding value of approximately ~$200 billion. A significant proportion of home and car loans, trade receivables, and personal loans are funded through ABS and RMBS. The big four banks, second tier banks, building societies and non-bank lenders use the ABS and RMBS markets to raise funds from all parts of the world.
“Evidencing the credibility of the ABS and RMBS markets as a funding mechanism for ADIs, the issuance of ABS and RMBS is overseen by Australia’s banking regulator, APRA. Furthermore, and with few exceptions, ABS and RMBS are rated by at least one of three global credit ratings agencies,” said Mr Lambert.
IAM’s ABS-RMBS product is competitively positioned with a management fee of just 0.35 per cent a year, providing investors with cost-effective access to primary and secondary market offerings.
“This low fee structure, coupled with Mr Perkins’ expertise, makes IAM’s ABS-RMBS product a compelling option for investors seeking attractive yields and diversification within their fixed-income portfolios,” said Mr Lambert.
“Large scale ABS and RMBS funds typically charge investors ongoing fees of 0.50 per cent to 0.90 per cent a year, plus platform fees and bid-ask spread upon entry and exit, so our pricing will be more attractive. We expect that our competitive pricing will help to draw investors,” he said.
IAM’s ABS-RMBS product provides investors with several other benefits, including the ability to select from various credit risk levels, return profiles, and monthly interest payments to align with individual investment goals. The product also offers investors with the potential to benefit from higher yields compared to traditional fixed-income investments with a similar risk profile.
“Investors will benefit from predictable income and will receive monthly interest payments and principal repayments over the life of the security, and we are delivering full transparency regarding credit ratings, associated risks and expected returns,” said Mr Lambert.
The new service will complement IAM’s suite of fixed income products including term deposits, investment grade bond funds, and ASX-listed fixed income and senior secured institutional loans.
