Asset-backed securities (ABS) may have pushed the world into the global financial crisis, but fund managers are beginning to see value in the sector.
"A lot of people have just red-lined the space," Jack Ross, principal at Waterfall Asset Management, said in a panel discussion at the SALT conference in Singapore.
However, he believes that with the right team, it's safe to come back into the sector, while the complexity can put up a barrier to entry for competition.
Waterfall, which has around $2.4 billion in assets under management, focuses on high-yield ABS and loan investments.
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In the lead up to the global financial crisis, many banks loaded up on subprime mortgage-backed securities which were marketed as AAA-rated, generally viewed as safe. But due to poor lending quality, the underlying loans saw high levels of defaults, taking a huge bite out of the securities' value. The size and scope of the losses roiled the global financial system.
The ABS industry isn't just about sub-prime mortgages, he noted. There have been more than 60 sectors that have had securitized loans since the mid-1980s, with a wide variety of asset types, he said.