WHY FUND A SYNTHETIC BUSINESS?

Weekly Insights from Sol Berkoff
Principal at Charleston Capital, Inc.

Collateralized Debt Obligations (CDOs) are one of the most feared investments in fixed income.  They are frequently listed as a cause of the financial crisis.

Recently, CDOs have made a comeback.  Several recent articles in the financial press have detailed this return.

As someone who once traded CDOs, my honest opinion is that there is nothing inherently wrong with a CDO backed by actual bonds.

It is the return of the synthetic CDO, and the securitization of credit derivatives, that should worry us.

Synthetic CDOs create risk out of thin air.  They provide capital to nothing.  They are generated by models, priced by models, hedged by models, and loved by hedge funds.

We at CCM realize that small business finance is a nascent business.  We also realize that CCM itself is a nascent business.

There are small businesses all over the US that need financing.

We are looking to fill the $100 billion small business funding gap.

Why fund a synthetic business?