Hmm. Not sure what’s going on here. Either this is just a very garbled explanation or the two reporters aren’t quite sure what they’re talking about.

SIV-Lite vehicles tend to invest in high-reward, high-risk assets to
make the short-term commercial paper they issue to fund their
investment strategy more attractive. But the commercial paper
traditionally pays out every 90 days, which means that if the appetite
for such issuance disappears, a SIV-Lite can quickly face a liquidity
crisis.

SIVs, whether Lite or not, don’t invest in high risk assets to make their commercial paper more attractive. They do so to make their equity more so. The assumption is that, if structured properly (or, if you prefer, improperly, in the fantasy market conditions of the past couple of years), they will be able to borrow by issuing short term commerical paper at the usual market rate. This is then invested in those longer term, higher risk and (hopefully) higher reward assets that the SIV holds. This increases the gearing of the fund, which is the point. That increase in gearing, and as long as the investments continue to provide higher returns than have to be paid out on the commercial paper, then means higher profits for the fund: which goes to those who hold the equity, not those who hold the commercial paper. But the important point about the strategy is that the high risk investments are being made for the benefit of the equity holders, not the commercial paper holders…it’s entirely possible that said commercial paper will be paying a premium over LIBOR; but that’s not the point of the whole strategy.

Also, not quite sure what they mean by "pays out every 90 days". Yes, commercial paper often is issued for 90 day terms, and the usual assumption is that it will be rolled over at the end of the term. That is, as everyone is brining in the 90 day old paper by the front door, there’s a new set of 90 day paper being issued from the back door. "Pays out" might be the new word for this but I doubt it. Matures perhaps, leading to said rollover.

The last part is quite true though. As the old paper matures, if there’s no market for the new then funds can very quickly face liquidity crises: nothing new with that though, just the old peril of borrowing short to lend long.