How Securitisation Can Improve Returns

Last Updated: 

June 13, 2024

Securitization is a financial strategy that can significantly boost returns for investors by converting various types of assets into marketable securities. This approach is not just about enhancing liquidity; it also involves diversifying risk and potentially earning higher yields. In this article, we'll explore how securitization achieves these benefits and why financial experts like Bryan Ziegenfuse, managing partner at I Fund Philly (IFP), value this method.

Key Takeaways on Improving Returns with Securitisation

  1. Understanding Securitisation: Securitisation involves pooling various cash-generating assets and converting them into marketable securities to enhance liquidity and investor appeal.
  2. Asset Pooling and Risk Transformation: By pooling assets like loans and mortgages and categorising them by risk, investors can choose their desired risk level, making the assets easier to trade.
  3. Enhanced Liquidity: Securitisation transforms illiquid assets into liquid securities, allowing financial institutions to free up capital for further lending or investments.
  4. Diversified Risk: Pooling assets spreads the risk of default, minimising the impact of any single asset’s poor performance, thus attracting more investors and improving returns.
  5. Credit Enhancement Techniques: Techniques such as over collateralisation and third-party insurance improve the safety and attractiveness of securities, allowing them to be sold at a premium.
  6. Yield Improvement: The spread between lower interest rates paid on securities and higher rates received from underlying assets can lead to improved yields.
  7. Cost Efficiency: Converting illiquid assets into securities reduces funding and operational costs, contributing to overall cost efficiency and enhanced returns.
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What is Securitisation?

Securitisation is a financial process where different types of assets are collected together to form a new type of investment. Here's how it works in a simple way:

  • Asset Pooling: The first step involves gathering assets that generate cash, like mortgage payments or car loan repayments. These are typically assets that might not be easy to sell on their own.
  • Risk Transformation: Once pooled, these assets are organised into categories or 'tranches.' Each category has a different level of risk and potential return. This means that investors can choose which level of risk they're comfortable with, from very safe to more risky.
  • Issuance of Securities: After sorting the assets by risk, they are repackaged as new financial products, often called securities. These securities are then sold to investors.
  • Payments to Investors: Investors who buy these securities receive payments based on the cash flow from the underlying assets. For example, as people pay off their car loans or mortgages, that money goes to the investors.

This process turns assets that are not very liquid (hard to convert into cash quickly) into securities that are much easier to trade. This makes them more appealing to a wider group of investors. Through securitisation, financial institutions can attract more investors and free up capital, which they can use for other purposes.

Enhancing Liquidity and Diversifying Risk

One of the primary advantages of securitisation is the enhancement of liquidity. Assets that are typically hard to sell individually, like loans or receivables, become part of a larger, more liquid pool. This transformation is crucial for financial institutions, as it allows them to free up capital, which can then be used for further lending or other investment activities.

Bryan Ziegenfuse's extensive background in financial analysis and strategic planning greatly complements his current role at I Fund Philly. Having started his career as a financial analyst at IBM and then moving into significant roles in corporate strategy and financial modelling, Bryan brings a deep understanding of the financial markets and asset management. His expertise is instrumental in employing securitisation effectively to manage liquidity and risk, ultimately enhancing returns for real estate investors.

Moreover, securitisation diversifies investor risk. When assets are pooled, the impact of a single default is minimised, spreading the risk across various types of assets and investors. This risk distribution attracts more participants to the market, often leading to better pricing and improved returns.

Credit Enhancement Techniques

Securitisation often involves various credit enhancement techniques that improve the attractiveness and safety of the issued securities. These enhancements can include over-collateralisation, where the value of the collateral exceeds the value of the securities issued, and the use of third-party insurance. Such strategies not only attract a wider pool of investors but also allow the securities to be sold at a premium, further boosting returns.

In addition to his current role, Bryan's extensive experience as a Senior Trader and Vice President of Servicing Strategy involved intricate financial structuring and risk management. His ability to navigate complex negotiations and develop robust financial models ensures that the credit enhancements implemented in securitisation deals are both effective and prudent.

Yield Improvement and Cost Efficiency

Securitisation can also lead to yield improvements. Financial entities often benefit from the spread between the interest rates they pay on the securities and the higher rates received from the underlying assets. Furthermore, converting illiquid assets into securities reduces funding costs and operational expenses, contributing to overall cost efficiency.

Bryan's strategic and tactical abilities, honed through years of experience in capital markets and financial planning, play a crucial role in maximising these benefits. His leadership at IFP and previous senior roles in financial corporations emphasise his capability to optimise cost efficiency and hedge against market volatilities through well-planned securitisation strategies.


Securitisation is a powerful tool in the financial toolkit, offering enhanced liquidity, risk diversification, and potentially higher returns. For experts like Bryan Ziegenfuse, understanding and effectively deploying this strategy is crucial in the competitive world of real estate financing. Whether it's through strategic asset pooling or sophisticated credit enhancements, the goal remains the same: to improve returns while managing risks. As the financial landscape evolves, the role of securitisation in achieving financial efficiency and investor satisfaction continues to grow, making it a critical area for ongoing innovation and expertise.

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