Securities

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Any type of bonds or notes can be issued by a Luxembourg securitization SPV:

• the ones yielding a fixed interest rate,
• or variable interest,
• notes linked with an underlying asset,
• participating bonds, etc

This can also include Structured Notes, Euro Medium Term Notes.

Notes or bonds are debt instruments issued by the securitisation undertaking with yield and value which depends on the securitised assets/risks/cash flow.

Zero coupon bonds can also be issued and may be redeemable periodically or at the end of the securitization process.

A wrapper is commonly used by an investor, a trust, a family, or a promoter to structure a pool of assets into one single security.

It can be useful to hold several types of assets by subscribing to one single certificate instead of holding or subscribing to different securities.

As long as the securitisation undertaking does “not create the risk” it can hold securities which are actively managed by a third party asset manager (Actively Managed Certificate).

As mentioned above, assuming that the securitisation undertaking is not creating its own risk, there are many categories of instruments which may be securitised and placed into the wrapper among which:

• Shares
• Bonds
• Derivatives
• Funds
• Loans
• Any tangible assets

A Tracker certificate is commonly used by a Luxembourg securitization SPV, its promoter, a trust or, a manager  to issue a debt certificate which is linked with a specific (pool of) assets.

It can be useful to tranche a large assets or a position into different slices which are then subscribed by investors.

The asset linked with the Tracker Certificate can be:

• An investment in a project,
• A share in an investment fund,
• A construction, a land, real estate,
• A loan, a bond, a receivable,
• Shares in a hedge fund or a private equity deal,
• An index, a basket of underlying financial assets,
• A collection of art,
• A boat, plane, fleet, house,
• A future cash flow, IP, authors right, even a succession,
• Crypto assets,
• Shares, bonds or any securities

Actively Managed Certificates are structured products issue by a Luxembourg SPV.

Usual structured products are pre-packaged market-linked investments which use derivatives to gain a specific type of exposure to an asset or basket of assets.

AMCs differ as they can replicate an index provided by a third party advisor, or match an asset allocation linked to any type of asset, including shares, bonds, derivatives, currencies, investment funds, indices or other types of securities.

They can also sometimes be linked with real estate, private equity, participations, future cash flows or intellectual property.

They deliver payoffs which are directly linked to the underlying asset acquired by the securitization SPV and tracks it in a way that facilitates customized risk-return objectives.

Actively Managed Certificates are subject to the general rules for structured products, which are usually only distributed to professional investors. AMCs require a simplified memorandum or prospectus which set out the strategy’s basic parameters. These include:

• The asset manager and the roles of related parties
• Fees and compensation
• Description of the strategy
• Criteria for the selection of strategy components
• Benchmarking to a relevant universe
• Criteria for distributing income payments
• Leverage applicable on the strategy
• Details of where information on the strategy, including its composition and performance, can be accessed

Tokenization is mainly associated with the process of converting some form of assets into a token that can be issued, transferred, recorded or stored on a blockchain system.

This process converts the value of any object (tangible or intangible) into a token which can be exchanged along a distributed ledger technology.

This category of tokens consists of assets such as participation in real physical underlying, companies, or earnings streams, or an entitlement to dividends or interest payments. Regarding their economic meaning, the tokens are similar to equities, bonds or derivatives.

This category provides access to the goods & services that a specific project will launch in the future. Also, they can be used as a type of discount or premium access to the goods & services of the project.

Cryptocurrencies purpose is to be items of inherent value that are designed to enable sales, purchases, and other financial transactions. They are intended to provide most of the same functions as long-established currencies such as the U.S. dollar, euro and more but do not have the backing of a government or other body.

CLOs are debt securities which underlying assets are pooled portfolios of loans or debt instruments issued by companies or private equity firms.

After being repurchased, these loans are securitized and sold back into various tranches to investors with possible higher return than traditional loan investments.

The traditional composition of a CLO portfolio includes between 150 and 450 loans from 20 to 30 different industries which are segregated into senior tranches (Rated AAA and AA), mezzanine tranches (Rated A, BBB and BB) both accounting in general for 90 % of the portfolio and the last element consist of the equity tranche which is riskier but with higher returns potential.

• The CLOs offer greater flexibility through a broader product range and a well-diversified group of issuers
• The CLOs tend to offer a steady frequency of interest payment (generally on quarterly or monthly basis)
• The CLOs usually have high liquidity in terms of trading
• The CLOs have a lower default rate in comparison to other non-diversified securitized products
• The CLOs have a low interest-rate sensitivity due to their floating-rate nature in comparison to fixed rate instruments
• The floating-rate nature of CLOs make them a good instrument to tackle inflation

The issuance of shares or units to investors can used to raise capital for the SPV in exchange for providing the company equity.

In such a case, the investors usually receive preference shares issued by the SPV and each category of share gives the right to an income directly or indirectly linked with an asset, a risk, or a future cash flow generated by the SPV.

Each SPV may issue several categories of shares, with or without voting rights.

The shares may be tracking a specific asset or a future proceed.

Such shares or units may receive an ISIN number and be accepted in the clearing system.

Crypto assets are nowadays commonly used by an investor, a trust, a family or a promoter in their asset allocation. While these assets are part of the universe of investments they may be circumstances where investors wishes to a ‘classic’ debt security rather than holding the crypto assets in direct.

Some Promoters are issuing product (‘Crypto Notes’) to give access to their investors to tranche of a largest investment/crypto asset such as STO or offer via the note the income and yield linked to “staking”.

Others are using those Crypto Notes as a structure of investment into a specific assets and create an index which is linked to a basket of crypto asset.

Asset managers may place crypto asset into such SPV to let investor sharing the ownership of such crypto assets, create an investment solution for investor by virtue of which they receive one single Crypto Note which underlying assets are a basket of crypto assets or share
the risks linked the future cash flow linked to a specific combination
of investment into crypto assets.