What Is a Structured Investment Vehicle?
A structured investment vehicle is a specific kind of fund that has recently been used to generate profits in what some call “shadow banking.” In these types of funds, managers issue short-term securities at low interest, They then lend long-term securities at higher interest rates to make money from the borrowed capital. Reports indicate that structured investment vehicles were developed as recently as 1988 by major banks and used by various financial firms until 2008. Industry experts have revealed that structured investment vehicles are no longer part of the general financial community. The general method of getting capital for a structured investment vehicle, according to experts, was in selling accounts based on commercial paper. The volatility involved in this borrowing method was one criticism of the structured investment vehicle. The structured investment vehicle fund manager would use the LIBOR or London InterBank Offer Rate to set interest rates.
