Securitization can also improve balance sheet liquidity by converting long-term and illiquid receivables into funds that can be used for additional value-generating investments. Furthermore, securitisation enables end investors to obtain a more efficient market portfolio and thereby diversify their idiosyncratic risks. 5. However, the growing complexity over the years dissociated securitisation from its key positive attributes.
The role that market failures in securitisation, particularly securitisations of US subprime mortgages, played in precipitating the financial crisis has been widely acknowledged.