The collapse of Lehman Brothers Holdings Inc. has consigned some financial products, popularized by their acronyms, to the dustbin of history. But investors’ appetite for high-yielding and relatively risk-free securities never went away.
While the financial crisis permanently damaged the reputation of many esoteric, high-risk portions of the credit market, new products, some with more robust structures, have emerged. These days money managers are piling into leveraged loans, via securitized structures known as collateralized-loan obligations, and securities backed by consumer debt rather than mortgages. Even some types of collateralized-debt obligations, blamed by many for triggering the 2008 financial and economic meltdown, are making a comeback.