Trust-preferred CDOs spark concern

New angles

Research by Fitch Ratings suggests that the investment performance of trust-preferred collateralised debt obligations (CDOs) in the US has remained strong, despite growing concern among investors about concentration risk.

The underlyings in these deals are trust-preferred securities, which have both a debt and equity component. They are taxed like debt obligations but are classified as equities in a company’s accounting statement and are treated as regulatory capital. Banks and insurers issu