A Collateralized Fund Obligation (CFO), in finance, is a form of securitization involving private equity fund or hedge fund assets, similar to collateralized debt obligations. CFOs are a structured form of financing for diversified private equity portfolios, layering several tranches of debt ahead of the equity holders.

The data made available to the rating agencies for analyzing the underlying private equity assets of CFOs are typically less comprehensive than the data for analyzing the underlying assets of other types of structured finance securitizations, including corporate bonds and mortgage-backed securities. Leverage levels vary from one transaction to another, although leverage of 50% to 75% of a portfolio's net assets has historically been common.

The various CFO structures executed in recent years have had a variety of different objectives resulting in a variety of different structures. These differences tend to relate to the amount of equity sold through the structure as well as to the leverage levels.

[edit] Private Equity CFOs

Since the advent of CFOs (ca. 2002), there have been only a handful of publicly announced private equity securitization transactions. Typically, owners of private equity assets will securitize a portfolio of funds as a way of generating liquidity without an outright secondary sale of the funds.

• In 2006 Temasek Holdings completed $810 million securitization of a portfolio of 46 private equity funds^[1]

• SVG Capital has executed three CFO securitizations as part of its "Diamond" program, SVG Diamond (2004), SVG Diamond II (2006) and SVG Diamond III (2007).^[2][3]

• Tenzing (2004) — Securitization of private equity fund assets by Invesco

• Pine Street (2003) — Securitization of private equity fund assets by AIG

• Silver Leaf (2003) — Securitization of private equity fund assets by Deutsche Bank

[edit] See also

• Collateralized mortgage obligation
• Private equity secondary market
• Private equity fund
• Hedge fund

[edit] References

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v • d • e Topics on private equity and venture capital Basic investment types Buyout • Venture • Mezzanine • Growth • Secondaries • Equity co-investment History History of private equity and venture capital • Early history of private equity • Private equity in the 1980s • Private equity in the 1990s • Private equity in the 2000s Terms and concepts Buyout Financial sponsor • Management buyout • Divisional buyout Venture Seed money • Startup company • Angel investor • Venture capital financing • Pre-money valuation • Post-money valuation • Venture round • Venture debt • Bootstrap funding Structure Private equity firms and funds • Limited partnership • Limited liability company • Carried interest  • Management fee • Publicly traded private equity ( Business Development Company, Venture Capital Trust) • Private Investment in Public Equity (PIPE) • Pledge fund Investors Institutional Investors • Pension funds • Insurance companies • Fund of funds • Endowments • Foundations Investment Banks • Commercial Banks • High net worth individuals • Family offices • Sovereign wealth funds Related financial terms Undercapitalization • Initial Public Offering (IPO) • Mergers and acquisitions • Leverage • High-yield debt • Capital structure • EBITDA Private equity and venture capital investors • Private equity firms • Venture capital firms • Portfolio companies

v • d • e Structured finance Securitization Securitization transaction · Credit enhancement · Tranche Types of Securities Asset-backed security · Mortgage-backed security · Credit derivative · Collateralized debt obligation (CDO) · Collateralized mortgage obligation (CMO) · Collateralized bond obligation (CBO) · Collateralized loan obligation (CLO) · Collateralized fund obligation (CFO) · Senior stretch loan