Returns on Subordinate Cotas for Brazilian ABS

FOR SROLLING BAR__1__waterfall black whiteLatin America Structured Finance Advisors just completed a study of the returns and the risk profile for subordinated cotas (tranches) of Fundos de Investimento em Direitos Creditórios – FIDCs – Brazilian ABS.

We know of only one other study that has calculated returns for this asset type and that was completed in 2007 by Uqbar.

The data shows that this investment sector is high-risk with high returns. Subordinate tranches for FIDCs are generally not marked to market; the variation in returns comes from volatility in the FIDC’s operations and credit management.  The risks are amplified by the lack of liquidity and the lack of transparency. However, investors with the tools to understand and manage the risk have been rewarded with substantial returns.

Click here to access the full report.  LASFA_returns_subordinate_tranches final

Vernon Budinger,

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