Scherer Capital Advisory

Structured Finance

For years now, steadily tightening regulations (Basel II, Basel III, minimum requirements for risk management, etc.) have been observed within the national banking landscape, such as international capital markets. In the course of this, synchronous structures with changing, sometimes unconventional lenders have opened up as meaningful and convincing additions. Alternative financing instruments as a supplement or substitution to the German-dominated classical banks debt financing have meanwhile arrived on the market and are fully established ("Mezzanine financing instruments" see inter alia the example of Exporo "Crowdfunding / Crowdinvesting",). The motivation for these alternative lenders is, in particular, the low interest rate situation since the recent financial crisis. An investment (in the context of overall balanced portfolio management) in subordinated structural parts such as junior loans, mezzanine or equity investments is of course extremely attractive in the context of the focus on the expected interest income for investors. It should be noted, however, that even subordinated lending portions are leveraged products with a higher risk at the same time.

The basic principle of Structured Finance can be described in German as "sequential loss allocation". In the field of securitization, such as Commercial Mortgage Backed Securities (CMBS), Residential Mortgage Backed Securities (RMBS), and Commercial or Residential Mortgage Backed Securities, a loan portfolio is virtually "tranched". Structured object, project and portfolio financing work on the same principle.

A key component of the structured finance model is risk-adjusted pricing. This is offset by higher risk premiums compared to the higher probability of default of the long-term tranches, loans and equity investments.

However, risks can be controlled within certain limits - one of the core services of Scherer Capital Advisory. For the above reasons, it is u. a. That is why in the recent past we have increasingly come to "structured finance solutions", which we see as the core of our range of services.



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