Australian Asset-backed Securities: 101
The opportunity set in Australian ABS has been growing in size and appeal to investors over the years—but what are ABS, and how do they compare to RMBS?
In recent years, asset-backed security (ABS) issuance has grown to become a key component of the Australian securitisation market. This is not just a function of the growth of the ABS market— but also of the increasing and potentially appealing investment opportunity set.
In this piece, we aim to improve the understanding of this asset class by answering some common questions:
• What are ABS?
• Are the risk-adjusted returns of ABS in Australia comparable to residential mortgage-backed securities (RMBS)?
Background to the Australian ABS Market
Prior to 2021, the Australian securitisation market was dominated by RMBS, which represented approximately 82% of the average issuance between 2010 and 2020.1 The remaining balance was represented by consumer ABS backed by cashflows from personal financial assets such as auto loans (auto ABS), credit cards and small-to-medium enterprise (SME) ABS backed by small ticket commercial and residential properties.
This contrasts with the U.S. market where ABS represented approximately 50% of public securitisation issuance and had evolved into a US$1.6 trillion market.2 In the U.S., the asset classes being securitised are expanding rapidly beyond its origins in the mid-1980s of auto loans and credit card receivables, to now cover multiple asset classes including non consumer assets such as corporate loans—which represent the largest ABS asset class (by volume) and are commonly used as an industry benchmark.
1. Source: Bloomberg. Average issuance 2010–2020.
2. Source: SIFMA. As of December 2024.
