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Asset-Backed Finance

NAV specialist lender sees robust 2025 pipeline

17Capital rides NAV boom with US$2bn deployed in six months; Moody's forecasts insurer allocation growth

The net asset value (NAV) financing market is rapidly scaling, with 17Capital forecasting that it could reach US$145bn by 2030. The NAV specialist lender points to surging GP demand, growing LP acceptance and rising institutional interest - particularly from insurers - as key drivers of continued growth through 2025.

“We’ve deployed over US$2bn in the past six months alone,” says David Wilson, partner at 17Capital. “That’s a clear indicator of just how rapidly the NAV financing market is scaling – and how well-positioned we are to ride this wave of expansion.”

Although NAV financing has historically been viewed with caution, Wilson says perceptions have shifted, particularly among GPs looking to optimise fund performance in a more competitive capital-raising environment.

“This is about portfolio management,” he says. “Private equity firms aren’t just buying and selling businesses anymore – they’re thinking hard about how to manage the fund itself. NAV finance helps them invest more efficiently, optimise returns and support growth across the portfolio.”

The primary use-case for the firm’s clients remains 'money-in' – utilising NAV proceeds to fund follow-on investments and new platforms, rather than distributing liquidity to LPs. “It’s all about growth capital,” he emphasises.

“A few years ago, there was scepticism. LPs wanted to know what it was, whether it was beneficial to them,” adds Wilson. “But with more education, more visibility from brand-name GPs using it and the ILPA’s constructive guidance, that has turned a corner.”

Indeed, the Institutional Limited Partners Association (ILPA) issued a paper on NAV finance last year that Wilson says offered helpful validation: “Essentially, the guidance confirmed that NAV financing is here to stay – and LPs have started to accept that when used responsibly, it aligns with their interests.”

With over 120 NAV deals completed and capital raised solely for this purpose, 17Capital is one of the market’s original pioneers.

“NAV finance is all we do – and we’ve been doing it for 17 years,” says Wilson. “That matters. We know how to structure these deals for GPs because we’ve seen every use-case before.”

The firm’s US$2bn of capital deployed over the past six months reflects a global strategy evenly split between North America and Europe, with a focus on buyout sponsors.

He also points to the firm’s ability to offer large ticket sizes and its global reach, with offices in London and New York, as key differentiators compared to smaller, newer players entering the market.

While 17Capital continues to innovate around deal structures – tweaking terms and adapting to GP needs – it remains committed to its niche: NAV lending to private equity buyout funds.

“We’re not trying to reinvent the wheel or move into venture or infrastructure,” says Wilson. “We want to evolve our product to fit the market, but always within our expertise area.”

Infrastructure, insurers and market tailwinds

Although 17Capital focuses on buyouts, Wilson acknowledges growing interest from infrastructure sponsors seeking fund-level liquidity amid longer timelines and rising construction costs. “Although that’s not our focus, the need is definitely there,” he says.

Insurers, meanwhile, are becoming active participants – not as originators, but as investors in funds like 17Capital’s or as syndicate partners in individual deals.

“They love the risk-return profile,” explains Wilson. “They see NAV finance as more attractive than traditional direct lending.”

According to a new report by Moody’s, fund finance now represents between 1% and 8% of life insurers’ investment portfolios, and allocations are expected to grow significantly over the next three to five years.

While commercial real estate and private placements remain their largest holdings, insurers are broadening their strategies by expanding investment management capabilities and partnering with alternative asset managers.

Amid these market shifts, 17Capital expects a robust pipeline for the remainder of 2025.

“Deal flow is strong and growing rapidly. We’re in the mass adoption phase now,” says Wilson. “This is no longer an edge case. NAV financing is a core part of the GP toolkit.”

Still, he cautions that continued education, especially among LPs, and maintaining a high standard of underwriting across the market will be crucial to sustaining momentum.

“NAV finance is a powerful tool – but like any financial innovation, it needs to be used responsibly. One aggressive deal from an inexperienced player could give the whole market a black eye,” notes Wilson.

Marta Canini

Capital Relief Trades

NA bank reg cap market at the crossroads

Meagre 2025 volumes, but progress evident

The US CRT market could do with, in the words of one experienced market-watcher, “a little less conversation, a little more action,” – citing the bard of Tupelo, Mississippi.

Since the start of 2025, there have been only a smattering of deals. The well-publicized Third Coast Bank  came to the market two months ago and did another this week, Huntington Bank came back to the market with another deal , US Bank have done another trade and there have been rumours of a JP Morgan auto loan deal but very little else to speak of. Meanwhile, the European market continues to churn out deals on an industrial basis.   

However, while this is doubtless disappointing, it still represents a significant step forward compared to two years ago. It is possible, and probably realistic as well, to view the US CRT glass as half full not half empty.

It is less than two years since the Federal Reserve issued its now famous guidance on capital treatment of CLNs, giving the green light to the market after years of ambiguity and obfuscation. Since then, more than a handful of regional banks have entered the arena for the first time – names like Pinnacle, Huntington, Valley National, Merchants Bank of Indiana, Ally and others, in addition to the more established GSIBs.

“We have 10-15 new banks that have entered the space in the past year and a half or so, and to me, that is still a watershed moment. To have these domestically focused regional banks entering the space - that would have been unthinkable a couple of years ago,” says a well-placed CRT professional.

The US market is still in its infancy, while the European market has had perhaps 15 years to accumulate familiarity and experience with the instrument.

There are, however, a number of specific reasons why the US bank market has seen less volume in 2025 than one might have hoped. The first is the pervading economic uncertainty, largely engendered by recent US tariff policy and the substantially erratic manner in which that policy has been prosecuted.

“If tariffs are 140% one day and 80% the next it’s difficult to plan your capital strategy for the next five years,” says Matt Bisanz, a partner at Mayer Brown and a leading authority on this market.

Interest rates are also higher than was thought likely a year or so ago. Ten-year Treasuries currently yield 4.46%, off the recent highs but still 30bp higher than early March. This makes all-in costs for issuers chunkier than they would like.

Costs, in fact, remain a key deterrent for regional banks. As a recent research piece by Seer Capital pointed out, “seven figure expenses are common for underwriting and rating agency work, not to mention the infrastructure needed in accounting and risk functions.”

Added to the general uncertainty, there are many leading positions at key agencies that are vacant, or filled by temporary or very recent occupants. Travis Hill is acting chairman of the FDIC, and was sworn in this January. Rodney Hood became acting Comptroller of the Currency a month later. Paul Atkins has been sworn in as chair of the SEC, but has been only there for less than six weeks. 

Major policy initiatives tend to emanate from the heads of the agencies, so there is still some confusion about which direction these regulators will take. That does not encourage banks to take a step into the CRT market for the first time.

There is also some doubt about which assets held by regionals make the best fit for CRT deals. Auto loans have been very popular over the past two years. Huntington and Ally have issued several auto loan CLNs, while Valley securitized its entire auto loan book in June 2024.

There are a number of compelling reasons why auto loans have been a popular asset for synthetic securitization. They are known and well-understood assets, are generally low risk and have a predictable cash flow.  CRT deals can be structured to look very much like traditional ABS, exploiting existing demand. But there is a limited number of banks with big enough car loan books to make this a profitable and repeatable exercise.

Investors also say they want to see more bank assets come to the market. “As a CRT investor, we seek exposure to portfolios of loans made by banks to their core clients in areas where they have a significant market presence and lending edge.  US bank balance sheets are full of such portfolios, beyond plain vanilla auto loans, and we are looking forward to seeing more of them referenced in CRT trades,” says Terry Lanson, portfolio manager at Seer Capital in New York.

Of course, hefty CRE exposures at a number of regional banks loom large on the horizon of possible assets. Everyone talks about this taking off; but it hasn’t yet. There are numerous structuring and pricing hurdles to be overcome, and, as ever, no bank wants to be the first mover. Moreover, as yet regulators have not confirmed that synthetic transactions will reduce CRE concentrations.

US banks are also generally well-capitalized, certainly compared to their European counterparts. North American regulators pushed banks hard to re-capitalize in the wake of the 2008/2009 financial crisis, while the Europeans took a more relaxed attitude. The result is that there is now more pressing need for CRT among a larger number of banks, particularly large banks, in Europe.

Finally, tightening spreads in the CRT market over the past couple of years represents something of a double-edged sword. On the one hand, it has made it more difficult for issuers to find buyers, but on the other it reduces costs and thus makes trades more capital efficient. Some twenty months ago, reg cap corporate spreads were riding high at about 10%-12%, and reg cap SME deals were only a little south of that.

This was enough to make asset managers and hedge funds who knew nothing about CRT sit up and take notice. A host of new investors came into the market at this time. But in June 2025, the air has been squeezed considerably.

Corporate and SME reg cap trades, according to the latest research by Seer Capital, are both below 8%, some 200bp-400bp narrower than October 2023. There is, however, still a considerable differential to high yield and BB CLO assets.

But one shouldn’t be downhearted about the US bank CRT market. These are still early days in the sector. The mechanism has gained the sort of traction and profile which no-one would have guessed two years ago.

“The conversation is a lot broader these days. Banks like Ally, Valley, Huntington actively talk about CRT in earnings calls and investor presentations. It’s seen as an essential driver of value and a tool to hit strategic objectives,” concludes another source.

Simon Boughey

Asset-Backed Finance

KKR retires credit opportunities platform, doubles down on ABF

Fund to be rebranded K-ABF amid shift towards longer-duration private credit

KKR is pulling the plug on its credit opportunities platform (K-COP) and rebranding the vehicle as the KKR Asset-Based Finance Fund (K-ABF), doubling down on ABF as private credit demand pivots toward longer-duration structured assets. 

The rebrand – expected to take effect from 30 August 2025, pending shareholder approval on 25 August – will see the vehicle adopt a revised strategy focused on exposures backed by consumer and SME loans, receivables, equipment leases and other self-liquidating asset pools. KKR will source these assets both directly and via third parties. 

K-COP, launched in 2020, was built to capture yield in a dislocated credit environment post-COVID, favouring floating-rate, short-duration assets across direct lending, high-yield bonds and senior loans. However, with rate volatility now easing and market dislocation fading, allocator appetite has shifted towards longer-term, more stable private credit exposures. The rebrand suggests KKR is leaning into its more established ABF strategy to align with that demand – although it also raises the question of whether this pivot was always part of the plan, or a tactical response to changing market conditions. 

Indeed, KKR has been among the most vocal institutional champions of ABF in recent years, and the shift from K-COP to K-ABF further consolidates that focus. “We believe that converting K-COP to a dedicated broad ABF strategy will be the most effective way for us to help meet this demand and broaden access to our extensive experience in this space,” stated Daniel Pietrzak, KKR’s global head of private credit, in a statement. 

KKR first entered the ABF market in 2016 and, across a global team of more than 50 ABF professionals, currently manages US$74bn across the strategy – up from US$61bn a year ago. The firm’s ABF strategy focuses on consumer/mortgage finance, commercial finance, hard assets and contractual cash flows and holds 18 captive ABF platforms across these four areas. This is intended to better enable investment sourcing and structuring. 

While KKR has publicly framed the name change as a rebrand, the timing and scope may point to a more fundamental strategic reset. Although it remains unclear whether this evolution was always part of K-COP’s roadmap or a direct response to market conditions. A spokesperson for the firm declined to comment beyond the public materials, stating that no additional information could be shared at this time. 

However, sources familiar with the matter confirmed there are no active hiring plans tied to the strategy shift. One industry insider with knowledge of the situation told SCI that the team leading the strategy is set to remain unchanged, with no personnel moves involved. The transition has been described as the launch of a new pool of capital under existing leadership, rather than a structural overhaul or internal repositioning. 

No details have yet been disclosed around new fundraising targets or additional capital raising, although the refocus positions K-ABF to sit alongside other dedicated vehicles targeting non-bank lending and structured private credit exposures. A preliminary proxy statement will be filed with the SEC, outlining the changes to fee terms and liquidity provisions to match the new strategy. Shareholders will not be required to take action unless voting against the proposal. 

The shift does align with broader industry momentum. Managers including Apollo, HPS and Barings have also expanded or restructured ABF platforms in recent months to meet rising institutional demand for bespoke, collateral-backed private credit.  

“The ABF market today is larger than the direct lending, syndicated lending and high yield bond markets combined and individual investors are increasingly demanding access to ABF investment opportunities,” said Pietrzak in the statement. 

With the post-COVID dislocation cycle fading, KKR’s rebrand signals a shift in private credit’s centre of gravity – away from fast-moving, tactical trades to longer-term, structured exposures designed to weather the rate regimes that lay ahead. 

Claudia Lewis

CLOs

Latham & Watkins on hiring spree as structured finance market heat up

Firm recruits 11-strong team to work in the London office

Latham & Watkins has executed one of its largest lateral hiring drives in London, completing its recruitment of a team of 11 former A&O Shearman lawyers. It is a move that marks the intensifying competition for structured finance talents as private capital firms increasingly turn to sophisticated solutions.  

Led by Franz Ranero and James Smallwood, whose imminent appointment was reported in April, the team will focus on expanding the CLO strategy and bespoke structured funding solutions for private capital clients. 

Ranero and Smallwood have brought decades of experience advising investment funds, financial institutions, and asset managers on complex, cross-border structured finance transactions. The duo departed A&O Shearman, where Ranero spent 24 years as a partner and Smallwood served for 13 years in the same role. 

"It's very energising," Ranero tells SCI. "It’s only been a few days but we all feel like part of the furniture already,” he comments. 

To the firm, the new hires are part of Latham's strategic expansion across Europe and the United States. “Latham’s purpose-built finance platform gives clients an unrivalled 360˚ view and unmatched depth across the entire finance landscape in London, across Europe, and globally,” says Jennifer Brennan, global vice chair of Latham’s finance department, on a statement. 

The 11-strong team of new hires recruited from A&O Shearman also includes counsel Jasleen Gill and eight CLO-specialist associates: Stephen Barclay, Bhavya Bhandari, Christopher Savage, Komal Khare, Charles Griffin, Lamis Essop, Jack Aldous-Fountain and Sarah Tofalides. All of whom joined the firm in early June. "It is one of the largest inbound team moves the firm has made outside of opening a new office," Ranero says.  

The London recruitment follows other strategic hires, including Jim Fogarty, who joined last year as a partner in the structured finance practice in the New York office. 

The move reflects broader market dynamics as CLOs have evolved from specialist products to mainstream financing tools.  

"It wasn't that long ago that the CLO market was a specialist corner of the broader ABS markets and only of interest to direct market participants,” Ranero says. “But now, the structuring technology is increasingly drawn as a core way private capital funds are financing themselves." 

To Ranero, their approach differs from competitors by providing "full coverage across fund strategy life cycle and across financing options.” He says the timing proved opportune as private capital firms seek innovative financing solutions: "The stars aligned for us." 

Marina Torres 

Structured Finance

European DataWarehouse expands to India with Bangalore office

New hub to serve global clients and develop securitisation products

European DataWarehouse (EDW) has started its operations in India by opening a new office in Bangalore. The goal of the company’s new centre for IT operations is to provide round-the-clock service for clients operating in non-European time zones, with software development and support for EDW’s flagship platforms on securitisation. 

Dr Christian Thun, ceo at EDW, tells SCI that establishing a centre for IT operations was a long-term company goal. "We always felt that one day we would establish our own tech centre, development hub in India, and an opportunity arrived just as EDW was ready to take that leap," he says. 

The move also aligns with EDW's strategy to expand beyond European markets, as Thun explains: "As part of this, we're now attracting customers from the Asian and Australian market. Having an office closer to that time zone makes perfect sense and gels very nicely with our overall growth strategy to have a footprint much bigger than just Europe.” 

The office is now the company’s third operational location, complementing its headquarters in Frankfurt, Germany, and the London office. From Bangalore, Gopala Sankaran, cto at EDW, describes the progress of opening the new hub.  

"The hard part is already behind us in terms of the bureaucracy of establishing the branch,” he tells SCI. “The exciting part is the actual work that’s being done. We have already hired one colleague and are planning to onboard another team member this July."  

According to Sankaran, the new office will focus on new product development, targeting both public and private securitisation markets, including CLOs. "We will do new product development, and our roadmap looks exciting to serve the securitisation market on the public side and on the private side, including CLOs," Sankaran says. 

Originally established to support the European Central Bank's asset-backed securities loan initiative, collecting data for the euro system in the aftermath of the financial crisis, EDW has evolved into a broader technology and data company serving global markets. "We definitely have outgrown that role and are becoming more than just a data repository, more of a technology and data company," Thun explains. 

Marina Torres 

Asset-Backed Finance

BC Partners to explore insurer-led strategy as private credit demand soars

With US$1bn deployed from its latest fund, BC Partners ramps up insurer-led plans, retail distribution and co-investment activity

Nearly two months after closing its third Special Opportunities Fund (SOF III) at US$1.4bn, BC Partners has deployed almost US$1bn of capital and is now exploring an insurance-focused, permanent-capital strategy alongside a growing retail distribution push.

“We’re exploring new strategies, one of which could involve a more permanent capital base, potentially through an insurance channel. That’s something we’re thinking about actively, and it’s likely to be a near-term development,” says Stephen Usher, md at BC Partners Credit.

The move comes as insurers continue their sharp pivot into private markets. According to a new Clearwater Analytics report, insurers are outsourcing a record US$4.5trn in general-account assets, a 25% jump year-on-year. Within that pile, private-asset AUM has jumped 34% to US$800bn, up from just US$50bn a decade ago.

“Private markets have become central to the insurance playbook – and the managers who can combine investment performance with technology and service excellence will lead the next chapter,” explains Clearwater ceo Sandeep Sahai.

Last week’s tie-up between Japanese insurer Dai-ichi Life Holdings and M&G is the latest example of this growing trend. Under the partnership, M&G becomes Dai-ichi’s preferred asset manager in Europe, with a commitment to at least US$6bn in new business flows over five years. As part of the deal, Dai-ichi also plans to acquire a 15% stake in M&G, reinforcing its strategy to expand into private and alternative assets.

BC Partners’ strategy aims to capitalise on this rising institutional appetite for private markets, blending senior debt and structured equity to target mid-teens returns.

SOF III’s portfolio is roughly split between direct lending (about 60%) and specialty finance (about 40%) – which includes NAV loans, aircraft leasing and asset-backed lending – areas buoyed by the retreat of regional banks in the US.

“We’re probably a little more excited on the asset-backed side of the transaction also because of some of the macro concerns. Tariffs and uncertainty don’t just impact companies’ EBITDA, but also their borrowing capacity. That makes specialty finance even more relevant post ‘Liberation Day’,” says Usher.

Co-investments have become a critical component of BC’s deployment engine. The firm typically syndicates transactions above US$100m, but is now fielding co-investment opportunities ranging from US$30m to US$200m.

“If all six of our current co-investment deals land, we could be nearly fully deployed, which is remarkable for a fund that closed three months ago,” says Usher. “We’re seeing deals we wouldn’t have seen a few years ago, before the pandemic.”

The recent acquisition of venture lender Runway Growth Capital has further expanded BC’s access to fast-growing middle-market companies.

“Now, every division has deal flow – and everyone’s raising their hand for capital,” says Usher, noting that he spends nearly half his time syndicating overflow through co-investments to meet demand.

Expanding retail investor base 

SOF III attracted interest from a wide rang of LPs, including retail investors, reflecting a broader trend of private wealth entering the space.

“With each fund – SOF I, II and now III – we’ve grown steadily every two and a half years, adding new investors while keeping our core institutional base,” says Usher. “Private wealth and retail investors are here. This is not a fad. We have greater LP diversification, which makes the platform stronger going forward.”

The firm has developed shorter-duration, more liquid products to attract this new investor base, including high net-worth individuals and RIAs.

“The cheques coming from the retail community far surpass what any institutional investor can currently do. The tables have turned,” notes Usher.

Marta Canini

Capital Relief Trades

SLR reduction hoped

CRTs vs SLR: US approach to bank capital

The challenging landscape for CRTs in the US shows no signs of easing, even amidst rumours of regulatory reform in the US Supplementary Leverage Ratio (SLR). 

The SLR, introduced in the wake of the GFC as part of widespread bank capital reforms, demonstrated a non-risk based capital approach in stark contrast to the European model, which prioritised risk sensitivity. Conceived as a backstop that measures banks’ balance sheets under the same standard regardless of asset risk, the SLR differed significantly from the European risk-based approach that facilitates a CRT strategy. 

“SLR looks purely at a bank’s balance sheet and exposure. It's almost designed to mitigate things like CRTs and other low risk weight strategies from excessively hollowing out a bank’s capital,” comments Matthew Bisanz, partner at Mayer Brown”.  

Under Basel 3 rules, large US banks must maintain an SLR of 5% (the standard 3% minimum plus an additional 2%). Unlike risk-weighted capital requirements, the SLR treats all assets equally, leaving Treasuries in an unusual position given that these are on the same plane as much riskier assets like mortgages. What’s more, CRTs can’t really take on a leading role in reducing banks’ leverage exposure, as the total pool of assets held by a bank count in full towards the SLR.  

Market rumours around SLR reduction   

The SLR has been unpopular among banks, with lobbyists reportedly advocating for its reduction. According to Bisanz, US authorities would have two mutually exclusive options if they end up adjusting SLR requirements. The first, and most widely rumoured in the market, would be a straightforward reduction in SLR to resemble that required of banks in other parts of the world. This approach, however, does not guarantee that banks will include more treasuries on their balance sheets. The second option would be for treasuries not to count towards the SLR calculation within the bank's asset base.  

Commenting on SLR outlook in the US, Bisanz notes how it would be more palatable to propose SLR reduction because it would be more consistent with international standards and it would not privilege treasuries in a way that causes banks to become overexposed to them. However, the quantity-based approach still won’t make the CRT market more attractive as it is in Europe where risk-based rule hold sway. 

A pricing and tranching dilemma  

Unlike its European counterpart, unfunded deals remain largely non-existent in the US. The fact that (re)insurance participation in CRT trades remains grounded ultimately influences pricing. "A fully funded CRT is inherently worse because it requires investors to put up collateral,” Bisanz said. This additional funding requirement therefore makes such transactions less attractive to investors.  

In addition, the Collins Amendment prevents U.S. banks from using internal models to calculate their risk-based capital requirements, cornering them to rely on standardised models. This means that for US CRTs, the first loss tranches must be thicker to meet regulatory thresholds. “For a non-mortgage CRT in the US, the first-loss piece typically has to be around 12.5%,” Bisanz said. “Whereas in Europe, you might see them in the 6% or 7% range — and if a bank is selling a 12% first-loss tranche, it’s inherently going to get worse pricing than if it were selling a 6% one.”  

US CRTs, therefore, face a pricing issue but also in the size and structure of their tranches. Capital regulations still suggest that CRTs face an uphill path to become widely popular in the US market in the near term.  

Dina Zelaya 

Capital Relief Trades

Third Coast Bank and EJF hit the tape again

Asset manager and Texas bank securitize CRE assets

Third Coast and EJF have teamed up for another CRT transaction, this time referencing pool of commercial real estate (CRE) loans.

The Texas Bank has entered into a US$150m securitization, rather than US$200m the last time out, but in other respects the structure – designed principally to avoid concentration risk – appears the same.

A second SPV, designated EJF CRT 2025-2, has been created for this deal. The US$150m loan was sold into this vehicle on June 3. An undisclosed portion of the exposure was then sold to EJF, while the bank retained the balance.

In April, US$100m of the original US$200m was sold to EJF and the remainder retained by Third Coast.

“EJF Capital is an amazingly innovative shop. They find outsized value by creating entirely new classes of transactions,” says Matt Bisanz, a partner at Mayer Brown. Once again, Mayer Brown acted as legal counsel to EJF, while Cadwalader also reprised its role as legal counsel to Third Coast.

In April’s deal, the assets referenced constituted a loan to a developer of 11 planned communities in Texas, which is somewhat unusual. However, today’s deal referenced CRE assets, which represent a weak spot for many regional banks, and this suggests that the structure could be used by other regionals to reduce concentration risk and capital requirements on a broad range of similar assets.

“We are pleased to once again structure and sponsor a securitization transaction for Third Coast Bank that will reduce the bank’s risk-weighted assets under applicable risk-based capital rules, while helping to further diversify the bank’s on-balance sheet loan portfolio,” said EJF co-founder and co-ceo Manny Friedman in a statement.

Simon Boughey

Capital Relief Trades

Regulatory colour

Risk-sensitive Risk Weight Floor and Solvency II in focus

Following last week’s leak of the two draft documents from the European Commission proposing adjustments to the CRR and EU Securitisation Regulation, we further update you on the upcoming amendments and their implications. 

On the capital side, market participants notably highlight the proposal’s introduction of a more risk-sensitive and proportionate framework. The proposals include a revised calibration of capital charges for senior securitisation tranches, including the introduction of a 5% minimum risk weight floor for "resilient" senior tranches that meet STS criteria. 

More specifically, the updated framework will lead to lower capital for low-risk assets, benefiting from reduced risk weights on retained senior tranches. This change aims to make SRTs feasible for portfolios with lower-Risk Weighted Assets (RWA), such as prime residential mortgages.  

Such reform fundamentally adopts and warrants last year’s paper: Rethinking the Securitisation Risk Weight Floor. 

On this aspect, one source praises a “fundamentally important” principle. They say: “It finally acknowledges that the senior tranche and the prudential capitalisation components are effectively the primary drivers determining whether transactions are made or not. It also sends out the broader message that all assets can be securitised.” 

Regarding the widely reported and discussed conversation(s) around “STS for (re)insurers”, our source describes an over-publicised phenomenon:  

From an impact perspective, (re)insurers currently hold a 5% share of the SRT market. Now that they should be able to do STS, they should realistically double their presence and activity. While this is both positive and a sign of progress, it certainly won’t monopolise the market. Personally, I feel this issue and segment gets so much focus because 2021 (when the EU extended the STS framework to on-balance-sheet synthetic securitisations) was fundamentally a legislative accident, whereby the best assets were ultimately given to US hedge funds. 

 Another week, another leak 

This week, another draft document outlines the preliminary ideas for amending the Solvency II Delegated Regulation. Regarding STS transactions, the drafts suggests a review of the prudential treatment of STS securitisations. The changes could result in aligning the capital requirements for senior STS tranches closely or (more importantly) equivalently with those of corporate or covered bonds (potentially reducing capital requirements by 10% to 40% depending on the credit rating and the underlying asset). Regarding non-STS transactions, the draft states the intention of enhancing the risk-sensitivity by introducing lower capital requirements for senior tranches (between 60-83%). 

On the latter, our source says: “While conceptually, this is an enormous development, the spread shock ratios are still way too high.” 

 Political implications 

Regarding the timeline and approval, the amendment package has been drafted and remains subject to European Parliament approval. If approved on schedule, sources suggest the new rules would take effect by July 2026.  

However, our source points to wider macro-political forces at play. They say: “If (president) Trump suddenly says he has a trade deal with Europe; Europeans will likely revert to their usual method of setting deadlines and not prioritising financial and economic aspects. Now, if Trump imposes tariffs, the notion of strategic autonomy will come into play.”  

They conclude: “Ever since Trump essentially woke up and threatened Europe, all of a sudden we have witnessed an acceleration and political realisation that something needs to be done and done quickly.” 

 Vincent Nadeau

CLOs

LGT Capital Partners debuts CLO platform

ESG principles to be implemented throughout the investment process

LGT Capital Partners has launched Legato, a platform for managing CLOs in Europe. The new platform focuses on building conservative portfolios, leveraging insights from the firm’s relationships with sponsors, and is open to institutional third-party investors.

According to Thomas Kyriakoudis, partner and co-head of private credit solutions at LGT Capital Partners, the decision to launch Legato represents a natural evolution for the firm, which has been investing in both senior loans and CLOs for more than a decade.

“We have been investing in CLOs for the past 12 years, so we have a good understanding of the product. I think it was a natural extension for us then to start managing the CLO platforms ourselves directly,” he says.

The platform reflects LGT Capital Partners’ broader ambitions for its credit business, which currently manages more than US$5bn of overall credit exposure. As a privately-owned family business, Kyriakoudis emphasises the long-term orientation of the firm regarding CLOs.

"We're seeking to make long-term strong credit decisions that generate value over time," says Kyriakoudis. "We're thinking about a five-, 10-year perspective of building these kinds of businesses, rather than responding to day-to-day market conditions.”

Legato will be co-managed by Kyriakoudis and newly appointed portfolio manager Ilina Chen; both supported by a team of analysts. Chen brings over 15 years of experience to the role, having spent the past decade at Ares Management and Sculptor (formerly Och-Ziff), where she helped build the firm's European CLO platform from inception.

"CLOs have been a core part of my professional journey. In addition to credit selection, there are a lot of technical factors that a normal leveraged fund probably doesn’t need to think about, but for a CLO it's quite important," she says.

LGT emphasises that ESG principles will be implemented throughout the investment process. "Our analysts, in addition to doing the normal modelling [and] looking at the credit profile, will take into account ESG factors," says Chen.

The approach involves placing credits on an ESG watch list and maintaining detailed engagement with borrowers, with analysts meeting management at least annually to address potential issues.

The launch of the platform is also enabling the company to shape its inaugural CLO transaction. Indeed, Deutsche Bank has been mandated as the investment bank for the placement of the CLO transaction Legato 1.

Chen indicates that the firm plans to issue this first CLO deal later this year, with timing dependent on market conditions and primary loan issuance volumes.

Marina Torres

CLO Managers

Emerging CLO managers face rising bar for entry, but see path to scale

CIC Private Debt and Acer Tree Investment Management share their experiences in debuting CLO deals alongside legal perspectives from Reed Smith at SCI's latest CLO event hosted at Reed Smith's office in London on 13th May

Speaking at SCI's ‘Emerging CLO Managers’ panel discussion, Steve Dunn, head of European CLOs and private debt at CIC Private Debt highlights that before the firm launched Victory Street I, they knew the odds were steep. Nonetheless, after nearly two decades in leveraged finance, it has finally crossed into CLO territory.  

“We were always looking to start a CLO business, but we really wanted to be in a position where we were well prepared to be considered a bona fide CLO manager,” he says.  

However, the path to get to the first issuance required a lot of background work. “One of the biggest challenges was going into a meeting room, and people will not necessarily want to work with first-time managers.” 

The experience was similar for Jonathan Bowers, founding partner and CIO at Acer Tree IM when it debuted with Logic Lane CLO I in 2022. He recalls having several calls and receiving negative responses despite raising 95% third party equity.  For him, it’s about getting the time right.  

“We were lucky. We priced a week before Putin went into Ukraine and that got us up and running,” he says. 

According to Bowers, the second time around with Logic Lane CLO II also came down to showing people they could be trusted. “We had done one deal three years ago, and then we've been told there's no liquidity in our bonds. I get it, but we couldn't do a deal for two years because of what was going on in Eastern Europe, and the availability of third-party equity was very hard to find. So, help me grow and I'll get you liquidity,” he says. 

In order to prepare, Dunn’s team took a proactive approach, armed with a track record but braced for scrutiny. “We would go and see our managers and ask them, what are your top ten pitfalls or what are the top things you need to think about?” he remembers. 

However, the answer is not always simple. For Mark Drury, partner at Reed Smith there are no clear regulatory headwinds, but managers need to be able to show they know the market well and have good outsourcing arrangements.  

“The regulatory landscape is relatively stable now,” he notes, “the real differentiator is execution and credibility.” 

It is key to get the infrastructure right and choose the right operational model for you, Drury points out. “Getting the right people in place, choosing the right arranging bank and definitely making sure you have the best lawyers you can, because they are working around the clock for you,” he says. 

To new market entrants, the message from the experts is clear: get everything lined up before you decide to jump in.  

“Get all your ducks in a row, so that you can go out there confidently and meet the investors and answer all their questions.” Dunn emphasises. “The investor base is highly sophisticated and knowledgeable. They’ll challenge every credit, every structure, and you really can't take for granted that the investor base will fall for anything if you don't be open and transparent.” 

Additionally, Bowers thinks it is key when talking to investors to show that you have a curated portfolio and can present the experience of the team. 

“You have to show people that you have the ambition to offer liquidity in your bonds, because you're going to get to scale with four or five deals over the couple of years,” he says. “Patience is key as well with ramping, you really want to show that you have a curated portfolio representative of a market vintage ,” he adds. 

Strategic update and growth outlook 

Looking ahead, Dunn says the firm is preparing to launch Victory Street II in the near term. “While progress was temporarily paused over the past month due to developments in the US and China, we had originally aimed to price the transaction during the Barcelona conference in June. Given the delay, we now anticipate a launch timeline around August to September.” 

CIC Private Debt intends to launch approximately one CLO per year, or potentially three every two years, to maintain a steady pace of issuance. “This cadence supports our investors’ desire for consistent liquidity,” Dunn highlights. To him, another main goal for the company is to keep its team stability, which, so far, has had zero turnovers in 10 years, and wants to keep the track record of zero defaults. 

With Acer Tree Investment Management, Bowers notes that strategically, the firm is not pursuing a shift into mid-market or direct lending, but instead remains committed to expanding within the current model. 

“Our platform is smaller relative to peers, and our immediate objective is to strengthen it—starting with team expansion. We’ve committed to hiring one analyst per fund and are in the process of opening a new warehouse, with the goal of closing another CLO before year-end.” 

In addition, the firm’s hedge fund strategy, which has doubled in size over the past year, may warrant further analyst hires.  

“The medium-term vision is to build a research team of approximately ten professionals. With that foundation, we believe we can comfortably manage several billion in credit strategies alongside our CLO business.”

“Over the next 18 to 24 months, our priority is to execute this roadmap: expand our core offerings, deepen research capacity, and deliver consistent performance for our investors. We are also exploring opportunities in the structured credit space and considering the deployment of locked-up capital solutions to further diversify our platform,” Bowers concludes.” 

Ramla Soni and Marina Torres

SCI would like to thank all market participants who attended our second CLO panel discussion on emerging managers and to Reed Smith for hosting. To book your place at upcoming SCI events and conferences, please visit our events page. 

Structured Finance

Job swaps weekly: Howden acquires Granular Investments to bolster CRT capabilities

People moves and key promotions in securitisation

This week’s roundup of securitisation job swaps sees Howden make a major acquisition to strengthen its European credit risk transfer capabilities, which will see two vendor founders work closely with its global credit and political risk team. Elsewhere, the TCW Group has named three co-portfolio managers to lead its newly launched private asset-backed finance interval fund, while a former global head of securitisation at UniCredit has joined Phinance Partners as a senior advisor. 

Howden has acquired Granular Investments and Granular Investments EU, strengthening Howden’s credit risk transfer capabilities in Europe and enhancing its product offerings for large financial institutions.  

Founded in 2019 by Giuliano Giovannetti and Richard Sullivan, Granular Investments is an intermediary and advisor in credit risk transfer and capital relief, specialising in synthetic securitisation and single-name credit risk solutions for banks and insurers. The pair will work closely with the global credit and political risk team and capabilities within Howden CAP, with the aim of broadening insurer participation in the credit risk-sharing market alongside banks and funds. 

Meanwhile, the TCW Group has named Dylan Ross, Max Scherr and Peter Van Gelderen as co-portfolio managers for its new TCW Private Asset Income Fund (TPAY), a private asset-backed finance interval fund that provides a range of investor types with exposure to ABF opportunities. TPAY is launching with over US$450m in subscription commitments, including an anchor commitment from Apollo S3 Credit Solutions. 

TPAY focuses on private lending opportunities that power the real economy, targeting transactions in the ABF market across the capital structure. To manage liquidity, approximately 20% of the fund will be invested in attractive liquid structured products. 

Ross, who joined TCW in 2024 to lead the firm’s ABF effort, has two decades of experience in alternative credit investing, with a primary focus on structured credit. Scherr joined TCW in late 2024 from Brigade Capital, where he ran financial investing, which included securitised and structured credit. Van Gelderen serves as co-head of global securitised within TCW’s fixed income group, which manages over US$80bn in securitised assets. 

Paolo Montresor has joined Phinance Partners as a senior advisor, based in Milan. He was previously global head of securitisation, receivables and strategic asset financing at UniCredit, having joined the bank as a DCM analyst in June 2003. 

Joe Weingarten has joined Bank of Hope as md, head of structured finance, based in New York. He was previously md - structured finance at East West Bank, which he joined in May 2020. 

O’Melveny has recruited Howard Goldwasser and Skanthan Vivekananda as partners in its corporate finance group. They both join from Orrick and will be based in New York and Los Angeles respectively. 

Colleagues for nearly 15 years, Goldwasser and Vivekananda have built one of the market’s top structured finance and CLO practices. They represent arrangers, lenders, asset managers, sponsors, investors and rating agencies in CLOs and other complex structured financings across a wide array of traditional and esoteric asset classes. 

Dechert has hired a four-lawyer team, including partners Sushila Nayak and James Jirtle, to its global finance group in London. This move further enhances the firm’s structured credit and CLO capabilities, reinforcing Dechert’s focus in the CLO and ABS space in both Europe and the United States, the firm says. 

Nayak brings experience advising on highly complex multidisciplinary financing transactions including CLOs, securitisations involving a broad range of esoteric assets (including trade receivables, commodities receivables, music and television rights, tax liens and renewable energy-backed loans) and private debt transactions for borrowers and lenders. She will be a leader of Dechert’s London-based CLO effort. 

Jirtle joins Dechert with experience in advising arrangers and managers on CLOs, counselling issuers and investors in connection with the warehousing and securitisation of various assets on compliance with European securitisation regulation requirements. 

In addition to the new partners, Dechert also welcomes two new associates, who will be joining the firm alongside Nayak and Jirtle, the firm says. 

Travers Smith has promoted nine lawyers to its partnership, with effect from 1 July 2025, two of whom focus on structured finance. Adam Burk is a financing lawyer specialising in structured finance and fund finance deals, advising originators and lenders across the full range of specialty finance, securitisation, portfolio sale and other asset-backed transactions. Nick Glynn advises on a range of financial regulatory and ESG matters, including cross-border fund marketing and distribution, securitisation, regulatory perimeter issues, regulatory capital and other prudential matters, sustainability disclosures and ESG financial product labelling. 

Dan Marcus has joined King & Spalding as a partner in the firm’s London-based finance and restructuring practice, where he will focus on structured finance and fund finance transactions across the UK, Europe, and the US. Marcus is known for advising on deals at the intersection of securitisation and fund finance, including ABLs, CFOs, rated note feeders, and warehouse facilities. Previously, he was a partner at Latham & Watkins, where he had worked since 2019. During his time there, Marcus has played a leading role in several innovative transactions, most notably advising on Europe’s first capital call facility to achieve securitisation regulatory treatment – the landmark US$240m transaction between HSBC and ICG, announced in late 2024. 

VG has appointed Cliff Pearce head of capital markets. He was previously global head of capital markets at TMF Group, with a focus on securitisation. Before that, Pearce worked at Intertrust, Merrill Lynch, Advicorp, Bear Stearns and Commerzbank. 

CPP Investments has promoted Paulo Merino to md, based in London. He was previously principal at the firm, focusing on underwriting and structuring structured finance transactions. Merino joined CPP Investments in October 2018, having worked at Deutsche Bank and Deloitte before that. 

And finally, Franklin Templeton has entered into a definitive agreement to acquire a majority interest in Apera Asset Management, a pan-European private credit firm with over €5bn in assets under management. The acquisition will expand Franklin Templeton’s global alternatives platform and its direct lending capabilities across Europe’s growing lower middle market.  

With the acquisition of Apera, Franklin Templeton’s global alternative credit AUM would increase to US$87bn and the firm’s total pro-forma alternative asset AUM would grow to approximately US$260bn, as of 30 April 2025. Apera will be complementary to Franklin Templeton’s existing global alternative credit offerings, alongside Benefit Street Partners in the US and Alcentra in Europe, further diversifying the firm’s geographic exposure and capabilities within the private credit asset class.  

Founded in 2016 and headquartered in London, with offices in Germany, France and Luxembourg, Apera provides senior secured private capital solutions to private equity-backed companies in Western Europe. The transaction is expected to close in 3Q25, subject to customary regulatory approvals and closing conditions. 

Corinne Smith, Ramla Soni, Marta Canini