Cementing trust in asset backed securities

Non-mortgage commercial asset-backed securities (ABS)

ABS are a cornerstone of institutional fixed-income portfolios, with around $4 trillion of annual global issuance (listed and unlisted) and $1.7 trillion in US listed securities outstanding.

These securities are backed with the cashflows received from services such as energy generation or equipment leasing. The underlying installations and equipment, with stable and predictable value, serve as collateral. That results in relatively low default risk compared with, for instance, mortgage-backed securities, where real-estate price swings can pose a significant risk.

Asset-backed securities are also generally considered a safer investment than private credit and corporate bonds, which are unsecured (i.e. do not have collateral) and fully rely on the issuer’s ability to generate sufficient cashflows from their business in the future, whereas the issuer of non-mortgage asset -backed securities, and hence the securities themselves, are typically insulated from the originator, and rely on the cashflows from a pool of contracts with several businesses and institutions, with collateral on the underlying equipment and installations.

Widely accepted, and in need of verification

Historically, non-mortgage ABS have been created for large institutional investors, centered on sizeable portfolios of high-value assets in mature markets. Their reliability rests on well-defined characteristics and well-established reporting standards.

Today, that trust is eroding, revealing the need for more transparent verification. At the same time, many non-US and emerging markets lack the infrastructure that underpins that trust, leaving the ABS market largely inaccessible to issuers with pools in those other markets.

Cathmere’s proof-based verification platform

Cathmere replaces trust with verification through technology. Using AI, IoT and blockchain, the platform provides mathematical proof as it creates immutable links between contracts, payments and physical assets, drawing verified data directly from the source, and submits the data to triangulation and analysis in a continuous quantitative review.

For overseas and emerging markets

For originators with pools of contracted cashflows outside the mainstream markets, Cathmere’s platform bridges the trust gap, enabling originators to structure asset-backed securities that meet the standards of investors in advanced markets.

Moreover, through its platform, Cathmere provides institutional investors with investable instruments that allow them to participate in the (re-)financing of the trillions of dollars required for decarbonization and climate mitigation projects in emerging markets, such as solar and wind farms.

For retail investors

Cathmere has built an investment platform for retail investors and welcomes integration and collaboration with all leading wealth management platforms, which opens the ABS market to accredited retail investors.

Also for advanced and industrialized markets

Integration with manufacturers’ telematics platforms that cover equipment and power-plant components simplifies the refinancing of vendor leases and vendor-financed portfolios.

Recent irregularities in the US ABS market have shown how weak asset verification can compromise even the most mature systems. Cathmere’s architecture makes vulnerabilities such as fraudulent duplication virtually impossible.