World Bank Backs New Structured Finance Hedge Fund

Sep 12 2011 | 2:33pm ET

A World Bank subsidiary will invest in a hedge fund for the first time, putting up $100 million to help launch a new fund that will buy securitized bank loans in an effort to help banks meet stricter new capital requirements.

The Christofferson Robb & Co. fund's investments will come with a World Bank-friendly catch: The money freed up must be lent to companies in developing countries. The bank's International Finance Corp. said it hoped the $400 million fund would allow for as much as $4 billion in additional loans to emerging markets countries, loans that have been imperiled by Basel capital requirements.

"It's very easy to trash structured finance right now because it was an often-abused product in the last five to seven years," IFC's Xavier Jordan told the Financial Times. "But it is still a product that can have an enormously good impact as long as the products are structured correctly."

In the case of the new CRC fund, the products will be structured as a senior tranche paying 7%, which IFC's money will be used to buy, and a riskier tranche paying as much as 20%, bought by the fund's private investments. New York- and London-based CRC is targeting a six-year lifespan for the new fund.

"Securitization is maybe not the flavor of the moment, but this transfers risk of banks and lets investors take the risk," CRC's Richard Robb told the FT. "If something really bad does happen, the bank can continue to perform its funcations and the investors take the losses, which they're ready for."


In Depth

Exotic Assets: Investing In Rare Violins

Jan 17 2017 | 4:43pm ET

By definition, alternative investments include exotic assets far beyond your typical...

Lifestyle

'Tis the Season: Wall Street Holiday Parties Back In Fashion

Dec 22 2016 | 9:23pm ET

Spending on Wall Street holiday parties has largely returned to pre-2008 levels...

Guest Contributor

The Trump Administration: What It Could Mean for Carried Interest

Jan 19 2017 | 5:25pm ET

The arrival of the Trump administration brings the potential for a repeal of the...

 

From the current issue of

Often seen as a passion project, or part of a philanthropic venture, rare and fine stringed instruments offer an exciting option to diversify one’s investment portfolio while providing an opportunity for an exceptional long-term investment.