For enterprises that have substantial assets under management, with significant compliance requirements, Broadway's funding solutions may provide a unique opportunity to bring enhanced liquidity to the balance sheet at a very low fixed cost over a very long term. Our New Products group has great expertise at designing hybrid financing that is both balance sheet neutral and available to banks, insurers, endowments, pension funds and public retirement systems.
To achieve the greatest benefit from Broadway's structure, an enterprise purchases the entirety of the offering and receives substantially all of the investable cash from the investment account. Additionally, even though the investment is structured as an arm’s length third party transaction, the enterprise may become the co-manager of the investment, actively participate in directing the investment and receive co-management fee income.
Several features unique to Broadway's methodology are relevant to large asset managers. The new debt is treated as an asset held at par plus accrued interest, so the cost to purchase the bond is entirely offset by the value of the bond on the balance sheet. Liquidity provided by the issuance of the new debt is immediate; as soon as the offering closes, cash in the investment account may be invested in the target enterprise. Collateral entirely invested in US Treasury securities eliminates concentration risk and reduces duration to one year or less. Taken all together, these features allow the creation of securitiesthat can be held by insurers and banks, providing unparalleled investment flexibility.
The type of structure described above is not theoretical; it has been successfully deployed before by a $6 billion US insurer, receiving a rating of AAA from Fitch ratings at issuance and again ten years later. Available to the market to address the current need for safe, cost-effective and flexible liquidity, Broadway's hybrid structure solves many of today’s capital needs for asset managers.