Risk Sharing Transactions: A Relative Value Perspective

In a previous research piece¹ we discussed the resilience of the Risk Sharing (SRT2) asset class to credit stress. The majority of investors we speak to acknowledge the attractiveness of Risk Sharing in terms of headline return and stability. One of the most pervasive questions we encounter, however, relates to the relative value of SRTs vis a vis comparable assets.

This question has, to our knowledge, not been addressed comprehensively beyond anecdotal evidence of “lower mark-to-market volatility than other securitised products” and “stable long-term IRRs”. Two main issues make the analysis of SRT relative value particularly challenging, which may explain why so little has been written on the topic:

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