Some Hedge Funds Want to Make Subprime Auto Loans Next Big Short
By
holding pen
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Many banks refuse to short auto ABS; some fear reputation risk
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Investors keen to short bonds as delinquencies tick higher
A group of hedge funds, convinced they have found the next Big Short, are looking to bet against bonds backed by subprime auto loans. Good luck finding a bank willing to do the trade.
Money managers have looked at betting that subprime auto securities will tank for many of the same reasons that investors wagered against risky mortgage bonds in the run-up to the financial crisis: Loan volume has mushroomed in the last few years, lending terms have become looser and delinquencies are ticking higher. Mary Kane, an asset-backed securities analyst at Citigroup Inc., wrote in a note late last month that the bank has received “an explosion of calls” in recent weeks, after the movie “The Big Short” portrayed a group of traders that wagered against subprime bonds…
Some Hedge Funds Want to Make Subprime Auto Loans Next Big Short
