In the last few months we've encountered a number of people (fortunately small) who have become confused by the term "structured investment vehicle" to the degree that they believe it has something to do with the term structured settlement. Rest assured that a structured settlement IS NOT a structured investment vehicle, as that term is defined in Wikipedia.
A structured investment vehicle (SIV) was a type of fund in the "shadow banking system". According to Wikipedia structured investment vehicles were Invented by Citigroup in 1988 and were popular until the market crash of 2008. The strategy of these funds was to borrow money by issuing short-term securities at low interest and then lend that money by buying long-term securities at higher interest, making a profit for investors from the difference.
A structured settlement is much more simple.
- Structured settlements provide "utterly boring" but stable guaranteed income to those who need it, for which they make no apology.
- For recipients of compensation for physically injury or workers compensation, structured settlements offer tax benefits that structured investment vehicles do not.
- Structured settlements may only be funded with structured annuities or obligations of the United States government.
- Structured settlements are not securities (variable structured settlements being a limited exception)
- Structured settlements were invented years before structured investment vehicles.