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Reasons to Consider Securitised Credit in Your Bond Portfolio
Wealth BuildingFixed Income & BondsInvestment Strategies
16 Mar 2026  I  4 mins read

Table of Contents

  1. Types of securitised credit
  2. Reasons to choose securitised credit investments

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  • The securitisation process aggregates and converts underlying assets, such as housing loans, hire purchase receivables, or other cash flow-generating contracts, into tradable asset-backed securities (ABS).
  • Malaysia’s dual financial system permits both conventional securitisation and Shariah-compliant Sukuk, making it a diverse bond market.
  • Securitised credit offers investors potential yield pick-up and diversification, enhanced by protective features such as over collateralisation.

Securitised credit refers to fixed income investments comprising publicly traded bonds or instruments backed by pools of cash-flow-generating contracts, including auto loans, residential and commercial mortgage loans, and credit card loans. These underlying assets are typically aggregated and converted into tradable securities through a process known as securitisation. As a specialised component of fixed income, securitised credit has developed within the broader structure of the Malaysian capital market.

The Malaysian capital market comprises several asset classes, including debt securities, the bond market, the equity market, and financial derivative markets. The securitisation process was introduced in Malaysia in 2001, following the guidelines of the Securities Commission Malaysia (SC) on the offering of asset-backed securities (generated through a securitisation transaction) to strengthen the Malaysian capital market.

Types of securitised credit

The Malaysian bond market offers a range of debt security products, including floating-rate bonds, straight or fixed-rate bonds, asset-backed securities, convertible bonds, and exchangeable bonds. Malaysia is also a key Islamic financial centre that offers a wide variety of Islamic capital market securities, including Shariah-compliant Sukuk.

  • Collateralised Loan Obligations (CLOs) are debt securities backed by a pool of corporate loans that are actively managed by professional CLO managers who adjust the portfolio to optimise returns and manage risks.
  • Asset Backed Securities (ABS) are debt securities created when the cash flows are derived from a pool of underlying assets, including credit card receivables, auto loans, and other personal loans.
  • Mortgage-Backed Securities (MBS) are securities backed by a pool of commercial mortgage loans. The cash flow comes from the payments from the commercial property owners. It is segmented into a few key types.
  • Residential Mortgage-Backed Securities (RMBS) are a significant type of MBS, backed explicitly by pools of mortgages on residential properties, such as housing loans, credit card receivables, higher purchase loans, loan receivables, billing materials, etc.
  • Commercial Mortgage-Backed Securities (CMBS) are financial instruments backed by mortgages on commercial properties. Investors seeking returns from the commercial real estate sector typically invest in it.
  • Collateralised Debt Obligations (CDOs) are a unique and more intricate type of asset-backed securities in which new pools of debt are formed by reconstructing and restructuring existing loans.
  • Asset Backed Commercial Paper (ABCP) is a short-term ABS with a maturity of one year or less. These are backed by various assets, including leases, margin loans, and short-term trade receivables.

Securitised Credit infographic

Reasons to choose securitised credit investments

Yield pick-up

Securitised credit often provides a higher yield compared to conventional bond instruments of similar credit quality.

Exposure to floating rates

Due to their floating-rate nature, securitised credit instruments typically provide a spread above a short-term reference interest rate, which allows the yield to track changes in market interest rates.

Space for price appreciation

As a credit instrument, when interest rates decline, Securitised Credit spreads tend to benefit, leading to tighter spreads. Since the 2020 COVID period, these spreads have remained relatively wider than those of traditional fixed-income instruments, creating potential for further price gains.

Credit enhancement

Securitised Credit structures include protective features such as stricter covenants and overcollateralisation and serve as a buffer against potential collateral losses.

Diversification advantages

Securitised Credit has little correlation with other bonds and can enhance portfolio diversification within the bond allocation.

Overall, while securitised credit provides potential for returns and portfolio diversification benefits, investors should keep in mind that it is not risk-free. Interest rate volatility, credit default, liquidity shortages, and structural complexity are factors that can influence performance. A profound understanding of these risks is essential for making informed investment decisions related to asset class.

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General Disclaimer

This article is for general information only and it does not constitute an offer, recommendation or solicitation of an offer to enter into any transaction or adopt any hedging, trading or investment strategy, in relation to any securities or other financial instruments. This article has not been prepared for any particular person or class of persons and does not constitute and should not be construed as investment advice or an investment recommendation. It has been prepared without regard to the specific investment objectives, financial situation or particular needs of any person or class of persons. You should seek advice from a licensed or an exempt financial adviser on the suitability of a product for you, taking into account these factors before making a commitment to purchase any product or invest in an investment. In the event that you choose not to seek advice from a licensed or an exempt financial adviser, you should carefully consider whether the product or service described herein is suitable for you.

You are fully responsible for your investment decision, including whether the investment is suitable for you. The products/services involved are not principal-protected and you may lose all or part of your original investment amount. Investment products are not deposits and are not obligations of, not guaranteed by, and not protected by the Bank or any of the affiliates or subsidiaries, or by Perbadanan Insurans Deposit Malaysia (“PIDM”), any government or insurance agency.

Standard Chartered Bank Malaysia Berhad & Standard Chartered Saadiq Berhad (the “Bank”) expressly disclaim any liability and responsibility for any loss arising directly or indirectly (including special, incidental or consequential loss or damage) arising from the financial losses of the investment products due to market condition.

For Takaful / Insurance Benefits

The benefit(s) payable under eligible certificate is protected by PIDM up to certain limits. Please refer to PIDM’s Takaful and Insurance Benefits Protection System (“TIPS”) Brochure for more information.

The information stated in this article is accurate as at the date of publication.

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