The demise of the leveraged investor

Highly leveraged vehicles have inflated demand for residential mortgage-backed securities in the past two years. Now the credit crunch has forced many to sell assets, cease investing or restructure. The outlook for the mortgage market hinges on their survival. Dippy Singh reports

The era of the highly leveraged buyer is all but over, according to one mortgage trader at a leading European investment bank. Banks and leveraged investors, which include asset-backed commercial paper (ABCP) conduits and structured investment vehicles (Sivs), have until recently accounted for 80% of buyers of RMBS, mainly buying triple-A paper, according to Merrill Lynch. But since leveraged buyers depend on the capital markets for funding, their recent liquidity problems have forced many to

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