Structural innovation and smart capital power rapid market expansion, triggering a race for skilled talent

Flexible structures and fresh capital are driving rapid growth in asset-backed finance (ABF), but a shortage of skilled talent threatens to slow momentum. In last week’s webinar, ahead of SCI’s European ABF Forum in London on 13 October, participants highlighted that from creative legal engineering to strategic partnerships, ABF is thriving on flexibility. However, rising demand for this complex offering exposes many market participants chasing a small pool of skilled human capital.

“This is about smarter capital entering the space,” said Ashley Thomas, head of structured finance at ARC Ratings. “The market has seen banks stepping away from parts of the real economy due to regulation, and ABF funds are stepping in to fill that gap.”

From rated feeder vehicles and forward flow agreements to mezzanine warehouse financings, the ABF toolkit is expanding.

“These are not off-the-shelf structures,” explained Alex Shopov, securitisation and structured finance partner at Linklaters. “Borrowers don’t ask for an ‘ABF solution’ – they want cheaper, more flexible capital, to fit their circumstances, not their circumstances having to fit a specific product line. ABF tools, including securitisation techniques, give us the flexibility to deliver just that.”

Rated feeders, widely used in the US, are gaining traction in Europe, where ‘horizontal’ vehicles are emerging to cater to a broader investor base.

“This adds complexity but opens access to a broader investor base with varying risk appetites, enabling more efficient capital allocation,” explained Thomas.

ABF’s scope is broad and growing in line with its evolving definition. Thomas described it as encompassing “diversified, cash-flowing portfolios – whether tangible or intangible assets – often structured like a securitisation, but negotiated privately.” 

He added: “We’re seeing everything from commercial ground rents and equity release mortgages to music royalties and digital infrastructure. It’s becoming more esoteric and diversified – and many in the market view that to be a good thing.”

This diversification makes sizing the market challenging, with estimates ranging from US$5trn to US$15trn, depending on what is included under the ABF umbrella.

For Ben Radinsky, partner at HighVista Strategies, ABF reflects “securitisation technology – developed in the public markets – being brought into private credit, driven by investor frustration with covenant-lite loans, asset stripping and creditor-on-creditor violence.”

According to Radinsky, the market can be split into three investable, interrelated segments: asset-based lending (ABL), backed by essential operational assets; private securitisations tailored to speciality lenders and fintechs; and hybrid structures for more complex or illiquid exposures.

While the US continues to benefit from a unified jurisdiction, Europe’s legal fragmentation forces greater creativity in structuring. “The complexity of cross-border transactions in Europe is exactly what drives innovation in deal structuring,” said Shopov.

Fintechs, insurers and partnerships

Fintech platforms are increasingly turning to ABF as a key funding channel. “It starts with equity, progresses to private securitisations and eventually to public issuance,” explained Radinsky. “Insurers and funds play key roles at different stages of that evolution.”

Insurers, private funds and family offices each play distinct roles within ABF, with insurers relying heavily on ratings, funds opting for bespoke solutions and family offices seeking custom terms.

Market consolidation is accelerating as larger managers acquire smaller ABF shops to secure origination. “It’s creating a barbell dynamic – big players scaling up, small ones staying nimble,” added Radinsky.

Strategic partnerships are also reshaping the funding stack. Shopov cited Ares’ collaboration with Investec Bank: “Banks still provide leverage; funds drive origination. It’s collaboration, not disintermediation.”

Talent bottleneck threatens growth

Despite strong momentum, a talent bottleneck may be ABF’s biggest growth risk.

“There’s a surge in ABF strategies and a fierce competition for what is still a relatively small pool of skilled professionals,” warned Shopov, who is co-author of ‘The Law and Practice of Securitisation’ published by Sweet & Maxwell this summer. “It takes years to build knowledge around multiple disciplines – structured credit, regulation, underlying assets. It’s not plug-and-play,” he added.

While ABF lacks broad data benchmarks, ARC Ratings’ Thomas points to a healthy performance trend: “Even without public benchmarks, the ABF deals we’re seeing perform relatively robustly,” he said. “But future resilience depends on origination quality, underwriting rigour and the manager’s experience. That’s what will separate sustainable platforms from the rest.”

“Looking ahead, regulatory reforms - potentially involving a unified European securitisation vehicle, as proposed by Linklaters’ Andy Vickery at Global ABS this month - could help address legal fragmentation and streamline cross-border deal execution,” said Shopov. 

Marta Canini