Tranche

In structured finance, a tranche is one of a number of related securities offered as part of the same transaction.

The word tranche means a division or portion of a pool or whole [1] and is derived from the French for 'slice', 'section', 'series', or 'portion', and is also a cognate of the English 'trench' ('ditch').

The deal's indenture (its governing legal document) usually details the payment of the tranches in a section often referred to as the waterfall (because the monies flow down).

The natural buyers of these securities tend to be hedge funds and other investors seeking higher risk/return profiles.

The problem now with the size of securitization and so many loans are not in the hands of a portfolio lender but in a security where structurally nobody is acting as the fiduciary.