Middle market investors are institutional investors that invest in securities that are not considered to be investment grade. These investors typically have a higher risk appetite than other institutional investors, such as pension funds and insurance companies.
Middle market investors include:
- Hedge funds: Hedge funds are private investment funds that use a variety of investment strategies to generate returns for their investors.
- Private equity firms: Private equity firms are firms that acquire companies and then either restructure them or sell them for a profit.
- Family offices: Family offices are investment vehicles that are used by wealthy families to manage their wealth.
Middle market investors are attracted to securitisation transactions because they offer the potential for higher yields than traditional investments. However, they also face higher risks, as the underlying assets in securitisation transactions may not be as secure as traditional investments.
Here are some of the applications of middle market investors in the context of securitisation:
- Investing in mezzanine debt: Middle market investors often invest in mezzanine debt, which is a type of debt that is issued by a company and that is subordinated to senior debt. Mezzanine debt typically offers higher yields than senior debt, but it also carries more risk.
- Investing in asset-backed securities: Middle market investors also invest in asset-backed securities (ABS), which are securities that are backed by a pool of assets, such as mortgages or loans. ABS typically offer higher yields than traditional bonds, but they also carry more risk.
- Investing in structured finance products: Middle market investors also invest in structured finance products, which are complex financial products that are designed to achieve specific investment objectives. Structured finance products can offer higher yields than traditional investments, but they also carry more risk.
Overall, middle market investors are an important source of capital for securitisation transactions. They offer the potential for higher yields than traditional investments, but they also face higher risks.