The recent collapse and subsequent bail-out of Silicon Valley Bank brought back some anxious memories of August 2008 for those of us who rode the wave of the global financial crisis. Thankfully, many of the lessons learned through that time were put to good use as US regulators toiled over what to do with SVB. However, it got us thinking about what lessons from the GFC were not learnt so well, and one of them has been the growing popularity of an obscure financial instrument known as a Collateralised Fund Obligation or CFO for short. In this newsletter, we will introduce you to these CFOs and let’s hope they don’t turn out to be the financial weapons of mass destruction that their ugly cousin the Collateralised Debt Obligation (CDO) did in 2008.
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