- Redraw is a feature of some securitisation products that allows investors to withdraw some of their money from the investment before the end of its term.
- The redraw facility is typically funded by the cash flows from the underlying assets.
There are a number of reasons why an investor might use the redraw facility, including:
- To meet unexpected expenses.
- To take advantage of investment opportunities.
- To reduce their exposure to the securitisation.
The redraw facility can have a number of implications for investors, including:
- They may have to pay interest on the redraw amount.
- They may reduce their return on their investment if they use the redraw facility.
- They may have to repay the redraw amount early if the securitisation is terminated.
Redraw is an important consideration for investors in securitisation. Investors need to understand the terms of the redraw facility before they invest in a securitisation product that offers this feature.
Here are some examples of how redraw is used in securitisation:
- Mortgage-backed securities: Some mortgage-backed securities offer a redraw facility. This allows investors to withdraw some of their money from the investment before the end of its term.
- Collateralized debt obligations: Collateralized debt obligations (CDOs) can also offer a redraw facility. However, this is less common than in mortgage-backed securities.
Redraw is a useful feature for investors who need access to their money before the end of the securitisation's term. However, it is important to understand the terms of the redraw facility before you invest in a securitisation product that offers this feature.