I don’t see the logic why securitized debt isn’t classed as a traditional investment?
Also, what happens to hedge funds that invest in equities or fixed income only? Are these classed as traditional also?
Securitized debt isn’t classified as traditional because the underlying assets are typically not traditional types of debt (i.e., where traditional = corporations or governments issuing bonds). The underlying are usually mortgages (residential/commercial), credit card debt, auto loans, CDS, etc.
Hedge funds that invest in equities or fixed income only are still classified as hedge funds. Although their underlying assets may be the same as an actively managed fund (esp. with “long-only hedge funds”), they are still different in terms of fee structure, minimum investment requirements, and liquidity.
Makes sense, thanks!