What is Securitisation?

To answer this, we need to first ask what is a security? It can be defined as something like "certificates issued in series by a corporate entity".

So, in simplified terms, securitisation is turning something into a security.

So if a company makes say 10 loans to real estate developers, then that set of loans can be securitized, so investors can own units in that set of loans, and those investors will benefit if the loans perform well. (Also, if you have a mortgage, there is a good chance it has been securitized into RMBS (Residential Mortgage-Backed Securities).)

Or if an investment advisor wants to create an investment portfolio for a client, then the basket of investments chosen (e.g. a selection of private investment funds) can be securitized, so investors can own units in that basket of investments, and benefit if the basket performs well.

Or if you securitise an artwork, the investors in the securitisation in effect own units in the artwork. Here is an example.

A good starting point for studying securitisation in Luxembourg is PwC's guide.