PT  - JOURNAL ARTICLE
AU  - Charles A. Stone
AU  - Anne Zissu
TI  - Fund of Fund Securitizations
AID  - 10.3905/jod.2004.412364
DP  - 2004 May 31
TA  - The Journal of Derivatives
PG  - 62--68
VI  - 11
IP  - 4
4099  - https://pm-research.com/content/11/4/62.short
4100  - https://pm-research.com/content/11/4/62.full
AB  - Securitization has been one of the most important capital market innovations in the last 30 years. Beginning with mortgage pass-throughs and CMOs, the creative use of collateralization and tranching to redistribute risk exposure has recently expanded significantly, as bonds, loans, and other securities exposed to credit risk have been securitized into CDOs, CLOs, and the like. In this article, Stone and Zissu describe the latest new product in this area, which combines both securitization and active asset management. The “Collateralized Fund Obligation” (CFO) is a securitization of a fund of hedge funds. The investor acquires the benefit of hedge fund returns that are (hopefully!) enhanced by active management and relatively uncorrelated with other asset classes, along with a much greater ability to manage the risk characteristics of the investment.