Structured Investment Vehicles.

A structured investment vehicle (SIV) is a pool of investment assets that attempts to profit from credit spreads between short-term debt and long-term structured finance products such as asset-backed securities (ABS). They use leverage, by reissuing commercial paper, in order to repay maturing debt.

A structured investment vehicle (SIV) is a type of special purpose fund that borrows for the short-term by issuing commercial paper, in order to invest in long-term assets with credit ratings between AAA and BBB. Long-term assets frequently include structured finance products such as Mortgage-Backed Securities (MBS), Asset-Backed Securities (ABS), and the less risky tranches of Collateralized Debt Obligations (CDOs).

Funding for SIVs comes from the issuance of commercial paper that is continuously renewed or rolled over; the proceeds are then invested in longer maturity assets that have less liquidity but pay higher yields. The SIV earns profits on the spread between incoming cash flows (principal and interest payments on ABS) and the high-rated commercial paper that it issues.