Most deals are thinly traded, and spread levels are difficult to determine during volatile periods. When money managers become more actively involved in the product as more deals are brought to market, liquidity will improve. Relative Value Future flow transactions still represent an extremely undervalued asset class. However, certain structural features of the transactions have become required by the rating agencies in order to achieve investment grade ratings. Subsequent securitizations out of the same SPV provided a continuity of issuance analogues to a shelf registration.
Some investors argue that future flow transactions have poor liquidity.
Since there are relatively few deals outstanding and insurance companies with buy and hold strategies are primary purchasers, secondary trading volume will be thin by definition. While no one disputes that sovereign risk can never be fully mitigated in a transaction, the rating agencies have clearly stated that this risk falls well inside the risks associated with sovereign debt, for example. In fact, investors will ultimately have to recognize that future flow transactions are independent from sovereign debt. When that occurs, spreads will tighten significantly.