In the first step of his journey into the often opaque world of credit markets, Real Vision managing editor Ed Harrison delves into structured finance and speaks to Chris Hentemann, CIO and managing partner of 400 Capital Management. Hentemann takes Harrison on a deep dive on asset-backed securities (ABS), sharing his outlook on collateralized loan obligations, mortgage backed securities (MBS), and the various risk and rewards that different levels of capital stack offer. Harrison and Hentemenn discuss the current status of Fannie Mae, which, years after undergoing “the largest bankruptcy ever” is now offering a new product called a credit-risk transfer. The pair then discuss the different opportunities and risks of commercial MBS compared to residential MBS, through the framework of the “K-shaped recovery.” Filmed on December 1, 2020. Key learnings: A low yield doesn’t imply a low risk, and a high yield doesn’t imply a high risk. Hentemann thinks equity tranches of ABS tend to offer a better risk/reward profile than the “safer” tranches.