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Asset-Backed Finance

ABF booms on flexible capital, but talent gap looms

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

Asset-Backed Finance

Aviation finance: Cloud cover - video

GlobalAir Finance Services's Wallach speaks to SCI about changing conditions in the aviation finance space

Evan Wallach, co-president of GlobalAir Finance Services, an advisory to investors in the aviation market, talks to Simon Boughey about the recent vicissitudes of this sector. He addresses the sudden refreshing upswing beginning in July of last year after the complete market shutdown during the pandemic, current pricing dynamics,  and then more recent headwinds in the shape of general market uncertainty.

Simon Boughey

Capital Relief Trades

Incrementally positive: (SRT) review of the European Commission's official proposal for reform of securitisation regulation

European Securitisation Regulation Amendments to substantially strengthen the use of SRTs

After various leaks, the draft amendments to the EU Securitisation Regulation and associated CRR provisions have finally been officially published, and synthetic SRT transactions appear to come out as the true winner of the proposals.  

Delving straight into the topic, a fundamental – and potentially transformative – point concerns the recalibration of risk-weight floors. Through such amendment, lower-RWA asset classes (including mortgages and IG) will benefit from reduced risk weights on retained senior tranches, thus increasing the amount of capital release from securitising these portfolios. In practice, the 5% risk-weight floor for senior STS positions (formerly 10%) enables significant capital relief on mortgage books. 

In terms of impact, Jeremy Hermant, senior advisor at Alantra, highlights an apparent enhanced capital efficiency and increased lending capabilities for banks, noting that: “Internal modelling indicates IRB mortgage pools can achieve 65 – 75% CET1 relief post-amendment, compared with negligible benefit under the previous 10% floor.” 

By way of example, he adds: “Imagine a resilient mortgage portfolio with a book value of €5bn, and a junior mezzanine tranche detaching at 2%, enough for SRT, to which you add a ramp-up feature where the book can reach €10bn after a year, this allows new loans to be incorporated even at a tighter margin offered to client as cost of capital has reduced due to the SRT capital relief. This presents a commercial solution for numerous banks to offer more attractive mortgages and also, on the risk sharing side, the longer maturity of mortgages has the potential to attract new types of investors in SRT, such as pension funds and insurers, so with one investment of €100-200m you make €5bn of new loans, therefore making housing more accessible and decrease banking systemic risk.”

Hermant further points to the implicit and underlying ambition in the regulation to create a model akin to the US GSEs Fannie Mae and Freddie Mac.[1]

Further key regulatory changes include the risk-transfer test (transition from mechanistic to principles-based SRT test); investor due diligence (now proportionate to the risk retained); and STS homogeneity (with the introduction of a 70% threshold).  

However (and perhaps unsurprisingly), there are still many highly technical discussions to be had. On this aspect, Georges Duponcheele, senior credit pm at Great Lakes Insurance SE, points to the notion (or lack thereof) of a “level playing field” and a divergence between KIRB and KA in the floor equation based on the impact of losses.  

New proposals are set to introduce a special category of SRT entitled “resilient positions.” These new deals will offer banks more favorable capital treatment compared to the existing STS transactions. Specifically, the risk weight (RW) floor for the senior positions will generally be lower. This new RW floor for resilient positions will be tied to the KIRB or KA of the underlying pool of assets. In practice, capital requirements will more closely reflect the actual risk of the assets. Instead of a fixed floor with risk-weight of 10% or 15%, the new system uses a risk-sensitive floor that's proportional to the underlying pool's risk weight. This change incentivises the securitisation of low RW assets by dramatically improving capital relief on retained senior positions. 

Duponcheele however still argues there is a disconnect between KIRB and KA and advocates for both IRB and SA banks “a factor of proportionality, such as 10%, be applied to KSA, the underlying pool risk-weight under SA excluding the proportion of delinquent assets. This choice would provide stable capital requirements for senior tranches, unaffected by model risk in KIRB or by delinquent assets in KA. This said, KIRB and KA are the correct notions to use in the capital formulae for tranches whose risk-weight is above the level of the floor.” 

He adds: “Whether an asset is financed by an SA, or an IRB bank makes no difference to the European economy, and from a financial stability point of view, all IRB and SA banks will have originated those assets according to strict EBA loan origination guidelines. Therefore, if assets have been originated with regulated origination guidelines, the senior risk weight floor should use the same reference for the underlying pool. This is KSA for both IRB and SA banks.” 

Regarding potential improvements, Duponcheele also calls attention to the “rubik’s cube” and its eight distinct categorisations resulting from combinations of STS/non-STS, resilient/non-resilient; originator/investor. Analysing the table, he says: “If as a structurer your senior position is above the minimum 7% floor—8% for example when you're dealing with a portfolio that has an 80% risk weight—, there's an immediate disincentive to create resilient STS transactions, because the factor of proportionality is the same 10% for non-resilient STS. The core issue is here I believe, based on these numerical values, the market isn't being steered sufficiently towards resilient STS transactions. To steer the European market towards resilient structures, the factor of proportionality for resilient senior tranches should be materially lower than for non-resilient ones.” 

Additionally, regarding prudential constraints, Hermant notes that (while the amendments ease risk-weighted capital consumption), “the leverage ratio (LR) could become the binding constraint for banks with sizeable low-RWA books and LR headroom may be the key variable when sizing future SRT issuance programmes.” 

Overall however, the overarching atmosphere and market response is genuinely positive. Sources emphasise a broader and fresh macro-political (even Draghi-generated) impetus towards European competitiveness. Hermant equally appreciates the fact that the Commission will also evaluate this package of proposed amendments, four years after its entry into application. 

Finally, Duponcheele notes: “80% of the work has been done by the European Commission, there is still 20% to be done via amendments to make the proposal work. Overall, there is clearly a lot of potential for the European securitsation market. The entire framework and all the significant points have been addressed – not necessarily as they should be – but they have been addressed.” 

Vincent Nadeau

Regulation

Fed steps around Treasury market exclusion

Proposed SLR changes carry broad support

The proposed changes to the SLR made by the Federal Reserve at its open board meeting yesterday (June 25) have avoided giving banks carte blanche to load up on Treasuries, say market watchers.

While preservation of Treasury market liquidity, particularly at times of market stress, appears to have been one of the primary considerations, simply excluding risk-free securities from the SLR would have represented a step into the unknown.

In March 2023 Silicon Valley Bank collapsed largely due to mismanagement of interest rate risk when Treasuries comprised a significant proportion of its assets and this experience perhaps weighs on regulators.

“If we do a change like the one proposed, it’s a known value, whereas if we eliminate Treasuries all together there is an unknown factor. Exactly how much would banks take on, and will everyone be as responsible as, say, a JP Morgan?” asks Matt Bisanz, a partner at Mayer Brown and an expert on banking regulation.

The proposed changes also apply to only the GSIBs, rather than the 30 or so banks to whom the SLR applies, and if exclusion of Treasuries had applied to only the GSIBs there would probably have been a call for this to be extended to all 30 banks.

These reforms were approved by the board by a 5-2 vote in favour. “It’s what I think a lot of people were expecting. There were a few variations that the regulators could have taken and this is the one that probably had the most support,” says Bisanz.

In the event, the impact of replacing the 2% SLR with 50% of the method one surcharge will have a variable impact. Bank of New York has a GSIB surcharge of 1.5%, so in that case the 2% will become 0.75%. However, JP Morgan has a surcharge of 4.5%, so its capital requirements will increase by 2.25% not 2%.

Large banks in the US are subject to a universal common equity tier one ratio of 4.5%, plus a variable stress capital buffer calculated through stress tests and the supplementary leverage ratio which is now also variable. GSIBs also have a surcharge.

The Federal Deposit Insurance Corporation (FDIC) filed proposals to reform the SLR two weeks ago, and these proposals are expected to a mirror image of the Fed’s proposed changes. The Office of the Comptroller of the Currency (OCC) unveiled identical plans in conjunction with the Fed yesterday.

“The proposal would better tailor our capital requirements for banks to ensure the enhanced supplementary leverage ratio functions as a true backstop — not a primary constraint that limits lending unnecessarily,” acting comptroller Rodney Hood said.

Simon Boughey

Capital Relief Trades

BBVA expands capital optimisation effort

SRT Market Update

BBVA has completed two synthetic SRT transactions with a combined value of €3.5bn. Combined with the €2.35bn cash SRT the bank closed at the end of May, the deals are evidencing its strategic priority to optimise capital and value creation by expanding its use of structured tools, with a focus on securitisation.

The two synthetic securitisations are: Galea 1, which references a €1bn portfolio of project finance loans; and BBVA Vela Consumer 2025-1, which references a €2.5bn portfolio of Spanish consumer loans. The cash SRT transaction – BBVA Consumer 2025-1 – is also backed by unsecured consumer loans.

Separately, BBVA has reached an agreement to sell a €314m portfolio of restructured and reperforming mortgage loans to One William Street Capital Management.

Capital Relief Trades

Santander brings back Colossus

SRT market update

Deal information

Santander has issued Colossus 2025-1, a synthetic securitisation referencing a £1.520bn portfolio of SME (79%) and CRE (21%) loans.

In terms of structure, the synthetic CLN features six synthetic senior tranches which amortise pro-rata until the occurrence of the subordination event and a fully subordinated synthetic junior tranche. Upon the occurrence of the subordination event, all synthetic tranches will amortise sequentially. Each synthetic senior tranche's pro-rata amortization share is calculated by dividing its adjusted notional amount (outstanding notional minus adjusted loss) by the total adjusted notional amounts of all synthetic senior tranches.

95.4% of the portfolio is denominated in GBP, and the rest is denominated in USD or EUR. Weighted average (WA) seasoning of the portfolio is 2.2 years, while the WA remaining life is 3 years. 42.1% of the portfolio is secured by commercial or residential properties with an LTV below 100%, while 20.3% of the portfolio was underwritten as income-producing real estate lending. The largest industry concentration is real estate (23.5%), followed by financial and insurance (22.9%) and human health and social work activities (10.6%).

Additional information

Naturally the Colossus programme is an established SRT Santander programme, with the last deal executed last year. Although structurally, both the 2024 and 2025 issues fundamentally share similar characteristics - featuring synthetic senior tranches that amortize pro-rata until a "subordination event" occurs, at which point all synthetic tranches (including the junior tranche) will amortise sequentially; both also benefit from hard credit enhancement provided by subordination at closing, with losses allocated in reverse order of seniority – the reference portfolio is significantly larger in 2025 (£1.520bn vs £680m).

In terms of pricing, one source suggests a weighted coupon rate of 6.5% for the E and F tranches.

Colossus 2025-1

Vincent Nadeau

ABS

EU securitisation reforms: a step forward, but is it enough?

Investors still face 'significant hurdles' compared to other asset classes

The European Commission’s recently proposed amendments to the EU securitisation framework aim to reduce the high operational costs for issuers and investors in EU securitisations and simplify certain due diligence and transparency requirements. While the changes have been welcomed as a positive step forward by many in the market, there is concern that the reforms may not go far enough to revive Europe’s lagging securitisation sector.

Salim Nathoo, a partner at A&O Shearman, describes the proposals as “a well-trailed helpful step in the right direction – simplifying the bureaucracy associated with the disclosure and diligence requirements for issuers and investors.” Notably, the increased involvement of the EBA in securitisation supervision is seen as a constructive move, recognising the key role banks play in the market.

Nevertheless, Nathoo is candid about the reform’s shortcomings. “It’s a shame the EC didn’t go further,” he says. “The proposals, as they stand, simplify a lot of bureaucratic rules but don’t remove them.”

While the changes may attract some new participants, he warns that the securitisation market still poses significant hurdles for investors compared to other asset classes. “It remains a specialist market for a small subset of investors,” he notes. “Investors are generally open to it, but they’re at risk of being sanctioned by regulators – a risk not present in other markets.”

The amendments to the CRR aim to introduce more risk sensitivity in the prudential framework for banks issuing securitisations. However, Nathoo cautions that these amendments might have unintended consequences.

“The capital rules, while broadly welcome, in some cases will make some positions worse and act as a disincentive for certain asset classes,” he says.

One especially contentious point is the introduction of separate penalties for investors under the Securitisation Regulation. Nathoo is clear: “This will not be helpful in attracting new investors.”

For insurance investors, in particular, the dual governance regime which requires them to comply with both insurance and securitisation regulations creates uncertainty and duplication. “Now you potentially have sanctions that create barriers to your investing, which is extremely unhelpful,” Nathoo explains.

Institutional investors outside the EU may be less directly impacted by the changes, but the lack of clarity on their implications could dampen enthusiasm. While the reforms attempt to align responsibilities more clearly, they also remove the ability for funds to delegate regulatory compliance responsibility, creating new liabilities for managers.

The package also includes draft amendments to the Liquidity Coverage Ratio (LCR) Delegated Regulation, which aim to address inconsistencies in the existing requirements that securitisations need to comply with in order to be eligible for inclusion in banks' liquidity buffer. This draft is subject to a four-week consultation period.

Overall, Nathoo maintains a cautiously optimistic outlook. “This is just the beginning. Much can still change, so watch this space.”

The proposed amendments to the SecReg and CRR have been submitted to the European Parliament and the Council for their consideration and adoption.

The market is now awaiting draft amendments to the Solvency 2 Delegated Regulation, which are designed to enhance the insurance prudential framework to better account for actual risks of securitisation and remove unnecessary prudential costs for insurers when investing in securitisations. Nathoo, for one, hopes these amendments will bring further alignment and reduce the regulatory friction investors currently face.

Matthew Manders

Alternative assets

Private credit strengthens its hold

US institutional accounts like private credit and debt more and more

Confirming anecdotal evidence, global asset manager Schroders today (June 25) released new data showing that institutional investors are turning increasingly to private credit and debt alternatives (PDCA).

In North America, 53% of institutional buyers identified PDCA as their top priority, compared to 40% in the rest of the world. Direct lending provides the best returns, say 65%, followed by asset-based finance (44%).

More than half of NA investors see PDCA strategies as more likely to produce stable returns amid an increasingly uncertain geopolitical and economic climate. These assets are also more likely to produce reliable income generation, they add.

Private equity retains popularity; an estimated 90% of NA buyside firms allocate to this asset class in some way. Small and mid-cap buyouts (61%) and venture capital (40%) are favoured sub-strategies.

The survey is based upon responses from over 1000 institutional investors overseeing US$67trn in assets.

Over half the NA respondents added that they expect the next 12 months to be more volatile than 2022-2023, with inflation making a return. This is not, perhaps, surprising, but what is rather more arresting is the expectation shared by almost half (47%) that the next year will be more volatile than the financial crisis of 2007-2009.

This widespread belief has meant active management strategies are now in vogue once more. Over three-quarters (76%) said that they are more likely to employ active strategies over the next 12 months.

Simon Boughey

Asset-Backed Finance

Carlyle and Diversified ink partnership for US energy assets amid global oil supply tensions

US$2bn deal targets mature domestic PDP assets as energy security concerns and investor demand converge

Carlyle and Diversified Energy Company (DEC) have teamed up to invest up to US$2bn in proven developed producing (PDP) oil and natural gas assets across the US, as a convergence of factors – from a robust pipeline of acquisition opportunities and rising demand for stable, cash-generating domestic energy assets – drives investor appetite. Heightened geopolitical tensions, including recent strikes on Iranian nuclear facilities and renewed risks of disruptions through the Strait of Hormuz, are adding urgency to the push for energy security.

“While the partnership is primarily driven by the strength of the opportunity set in US PDP assets, the broader macro backdrop underscores the importance of resilient, domestic energy production,” says Akhil Bansal, head of asset-backed finance at Carlyle. “As energy security becomes increasingly relevant in today’s environment, this collaboration with Diversified allows us to deploy institutional capital into stable, cash-generative assets that underpin reliable domestic supply.”

The deal, announced on Monday, combines Carlyle’s ABF platform with Diversified’s operational capabilities to acquire and manage mature PDP assets. Under the agreement, Diversified will act as operator and servicer of any acquired properties, while Carlyle will structure and securitise cashflows to attract longer-term institutional capital.

“This arrangement significantly enhances our ability to pursue and scale strategic acquisitions in what we believe is a highly compelling environment for PDP asset consolidation,” adds Rusty Hutson, ceo of Diversified. “With Carlyle’s support, we are well-positioned to capitalise on these trends while aiming to generate sustainable cashflow and value for our shareholders.”

Notably, the transaction’s structure marks an innovative approach in PDP investing. Carlyle’s ABF team integrates long-term financing into the front end of the acquisition process, providing capital certainty before a deal is finalised rather than refinancing afterwards, as is typically done in the sector.

“While PDP ABS isn’t new, it’s typically been used post-acquisition to refinance existing assets. What’s different here is the integration of long-term financing at the front end of the deal process,” explains Bansal. 

He continues: “This structure gives DEC upfront certainty during bidding, and gives sellers confidence by having the full capital stack in place from day one. For Carlyle, it’s a rare opportunity to invest alongside a top-tier operator at entry, fully aligned on timing, structure and basis.”

Carlyle’s ABF unit, which has deployed nearly US$8bn since 2021 and manages US$9bn in assets as of 31 March 2025, specialises in structuring capital solutions around pools of contractual cashflows.

“PDP assets fit that thesis extremely well. By combining Diversified’s operating platform with our structuring expertise, we can help unlock longer-duration, resilient financing aligned with the underlying characteristics of these assets,” notes Bansal.

Several dynamics are converging to drive investor appetite for PDP assets.

“We’re seeing a robust pipeline of acquisition opportunities, driven by capital constraints across the sector and a growing desire among sellers to monetise non-core or mature assets,” says Bansal. “At the same time, the strong cashflow profile of PDP assets makes them well-suited for institutional investors looking for yield, downside protection and real-asset exposure.”

The tie-up could be a blueprint for future partnerships in the US energy landscape and it also reflects Carlyle’s broader strategic goal of connecting institutional capital with essential sectors of the economy.

“This partnership is a great example of how Carlyle’s ABF platform can bridge institutional capital with essential parts of the real economy,” says Bansal. “We’re excited about the role this model can play in financing responsibly-operated, long-life assets – and in delivering both stability for investors and impact for the energy system.”

Marta Canini

Capital Relief Trades

Pricing resistance: PGGM's take on risk sharing

PGGM emphasises lenders' credit underwriting capabilities

In a market where pricing often dominates the conversation, Dutch pension investor PGGM sees beyond the headline coupon. While highlighting the various factors that currently shape SRT transactions, Barend van Drooge, deputy head, Credit & Insurance Linked Investments at PGGM, underscores long-term partnerships, credit underwriting quality, and a pricing-resistant philosophy."

“The market has been focused on Europe, with Eastern European banks increasingly opening up to SRT deals in recent years,” says van Drooge. PGGM’s transactions with mBank in Poland in 2022 and for the first time in November 2024 with UniCredit Bank Czech Republic and Slovakia (Project ARTS Morava), evidence the region’s strong and ongoing potential.  

Yet, the Dutch investor continues to see appeal in the US amid the current market conditions. Van Drooge signals how the firm “is not sticking to Europe”.

He adds: “There’s already a lot of exposure to US corporates from partners, including large banks in Europe. In addition, we don’t limit our investment capabilities and seek to expand selectively with partners who are best at what they do.” 

With a self-branded ‘no-name’ approach referencing the blind pools of assets in which they currently invest, PGGM’s core philosophy is engaging with market-leading SRT issuer banks. “A bank’s credit underwriting capabilities are held at the higher of standards (when it comes to investing in an SRT deal),” continues van Drooge.  

A pricing-resistant approach 

PGGM generally avoids highly syndicated transactions, making them somewhat less reactive to short-term pricing pressures, though not immune. “Last year, it was clear segments of the market had tightened.”

Since then, the broader economic uncertainty has increased. “In such times, as was the case during COVID, expectations of losses tend to rise. You can respond with an overall price increase or by negotiating terms. But most important is to know your risk-sharing partner well,” comments van Drooge. 

Key considerations include how actively partner banks are monitoring their portfolios, whether they are placing borrowers on watchlists or adjusting internal ratings to reflect deteriorating credit quality, according to PGGM. In credit risk-sharing (CRS), PGGM emphasises that pricing goes beyond headline coupons, and the real picture lies in the underlying risk profile, tranche structure and deal terms – all of which may signal risk more accurately than price alone. 

Simultaneously, PGGM’s '3D' approach places sustainability as a core dimension. Given the banks’ major role in financing the broader economy and enabling a green transition, the Dutch investor assesses lenders’ policies and that these align and hit targets on high-emitting sectors. PGGM’s ESG-linked €2bn corporate loan deal with BBVA at the end of 2024, which has since been upsized to a €6bn portfolio, underscores how ESG priorities are increasingly being hardwired into SRT deal structures.  

With €249bn of assets under management, PGGM has been one of the largest investors in the SRT space since it made its debut in 2006. The firm's strategy highlights the importance of long-lasting relationships with Europe’s top lenders.

“We don’t enter transactions opportunistically – we aim to build lasting partnerships with banks, so that when a transaction matures, we can roll it over into a new one and potentially expand the collaboration to other parts of the bank's lending portfolio,” concludes van Drooge. 

Dina Zelaya

CLOs

Global ABS attendees tip CLOs to lead European structured finance growth

Fitch who surveyed over 100 attendees (including investors, bankers and issuers) on their outlook for European structured finance for the rest of the year found that overall publicly-placed European structured finance will increase or remain stable in 2025

Majority of market participants (45%) attending the Global ABS conference in Barcelona this year have forecast the CLO sector to drive the most growth in European structured finance following record supply last year, according to a survey conducted by Fitch Ratings. 

This is followed by consumer ABS, RMBS (12%) and CMBS (8%). 

Just over 60% of respondents say they expect CLO issuance in 2025 to exceed last year’s €130 bn total, with 45% anticipating an increase of 10-25% and 16% predicting more than a 25% jump in issuance. 

However, 12% of respondents still believe volumes would decline year-on-year.  

Just under one third of market participants say favourable supply-demand dynamics were the biggest factor impacting their issuance expectations, with 27% identifying new issuers and asset classes as the primary factor shaping their predictions. 

Fitch believes resets of European CLOs are expected to continue in 2025. According to it’s latest European CLO Performance Monitor, roughly 20 pre-2022 transactions that have not yet reset are likely to do so in the next year, as well as 70-80 transactions from 2022 or later that would be in the money for a reset once their non-call period has elapsed. 

The survey conducted at  this year's conference also finds that uncertain macroeconomic backdrop stemming from recent escalations in the US-led trade war may have contributed to some doubts over full-year volumes.  

Over one quarter of respondents say trade policy uncertainty and/or slower growth were the most significant factors influencing their outlook for European structured finance issuance for the next year. 

It was also said at Global ABS that European CLO managers have started exploring multicurrency portfolio structures, especially in private credit scenarios, to cope with the continent's limited asset pool and seek new avenues for diversification. 

CLOs

Billion dollar onchain CLO strategy launched bridging institutional credit and DeFi

Backed by the Sky Ecosystem, Grove tokenises Janus Henderson's flagship CLO strategy with the aim of creating more efficient financial products and investment strategies

In an approach combining traditional finance (TradFi) and decentralised finance (DeFi), Grove, an institutional-grade credit infrastructure protocol designed to serve as the liquidity engine of DeFi, has allocated US$1bn to the Janus Henderson Anemoy triple-A CLO strategy (JAAA).

The move is said to mark the largest investment to date into a CLO investment strategy that has been digitised into blockchain-based tokens and operates within the DeFi ecosystem.

Grove - incubated by Steakhouse Financial and operating as a decentralised 'star' within the Sky Ecosystem (formerly MakerDAO) - serves as a secure, non-custodial capital highway linking TradFi to DeFi through tokenised real-world assets (RWAs). SCI understands Sky is creating specialised subsidiary DAOs called 'stars', where each 'star' focuses on a specific strategy for deploying capital.

Following the success in March of its tokenised treasury fund, Janus Henderson has once again partnered with tokenisation platform Centrifuge to bring its actively managed credit strategy fully onchain. The JAAA strategy is managed by the same portfolio team behind Janus Henderson’s US$21bn triple-A CLO ETF and is designed to offer onchain investors capital preservation and attractive yields, the firm says.

“With Grove, protocols can now access liquid, institutional-grade CLOs while retaining the agility to shift between DeFi and TradFi yield environments,” says Sam Paderewski, co-founder of Grove. “This allocation is just the beginning of building a permissionless onchain capital network that supports institutional-grade assets.”

Sky’s decision to allocate capital particularly to CLOs was driven by its own balance sheet strategy, liquidity needs and risk tolerance.

The firm tells SCI: “With an existing multi-billion dollar treasury allocation, the firm saw CLOs as a natural fit due to their floating rate structure, relative liquidity, standardisation and yield advantage over treasuries. Compared to other securitised assets or investment-grade credit, CLOs offer the right combination of scale and return to justify the allocation within the Sky ecosystem.”

The initiative comes as RWAs have gained traction, growing from US$500m to US$7.3bn in just over a year, according to Grove.

Grove addresses persistent challenges in DeFi, such as capital inefficiency and yield volatility, by offering compliant, diversified credit investments via its infrastructure.

The DeFi ecosystem is said to provide increased credibility, durability, diversification and long-term sustainability.

Nick Cherney, head of innovation at Janus Henderson, emphasises: “Bringing our triple-A CLO strategy fully onchain is a leap forward in integrating RWAs into DeFi. We believe this is part of the long-term evolution of finance.”

SCI also learns that Sky is looking to expand its product offerings and allocate more capital through innovative, blockchain-based solutions. “While specific products are still in development and under wraps, new launches are expected later this year.”

The firm sees growing interest and opportunity in tokenisation - particularly in using blockchain to represent credit more efficiently.

“In the long term, native token creation could reduce counterparty risk and costs. In the short term, the main benefit lies in tapping into the capital already onchain. Sky also plans to leverage its balance sheet to develop new products that improve upon existing DeFi applications,” the firm says.

In January, Janus Henderson Investors launched its first active fixed income CLO ETF in Europe. The firm’s B-BBB CLO ETF (JBBB) also surpassed US$1bn in assets under management a year ago.

Ramla Soni

Regulation

SLR changes proposed by Fed

Substantial reduction of SLR under consideration

The Federal Reserve today (June 25) proposed reducing the supplementary leverage ratio (SLR) for GSIBs from the current level of 2% to 50% of any GSIB’s method one surcharge.

The method one surcharge is a fee set for a GSIB based on its method one score, which refers to a bank's complexity and its place in the financial system.

The proposed change “significantly reduces the likelihood of the SLR becoming binding under stressed conditions for the largest banks and would more closely align it with the Basel leverage ratios,” said vice chair of supervision Michelle Bowman at the open board meeting this afternoon.

It is hoped that the shift will encourage banks to hold more risk-free securities like Treasuries, particularly in conditions of market turmoil. As a non-risk based capital requirement, the SLR has made ownership of these assets less attractive.

Neither, noted Bowman, will the change “lead to a material reduction of Tier One capital requirements.”

In his opening comments, Fed chairman Jerome Powell suggested that the SLR is no longer fit for purpose, having been introduced in the wake of the financial crisis of 2007-2009 when market conditions were very different and it was intended to be a backstop to the risk-based capital requirements.

“We expected reserves in the banking system to substantially decline in the following years. Instead, we have seen bank reserves increase substantially. We also have seen Treasury holdings in the banking system climb precipitously. This stark increase in the amount of relatively safe assets on balance sheet has resulted in leverage ratio becoming more binding,” he said.

Given these long term and fundamental shifts in bank balance sheets, it was “only prudent to reconsider our original proposal,” he added.

The proposal would modify the SLR standard for depository institution subsidiaries of GSIBs from the current 6% “well capitalized” threshold to a buffer standard equal to 50% of the parent GSIB’s method one surcharge.

A 60-day comment period now begins.

Changes to the SLR have been afoot for some time. Two weeks ago the Federal Deposit Insurance Corporation (FDIC) filed its proposals for modifications.

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Job swaps weekly: O'Melveny launches cross-disciplinary group with securitisation partners

People moves and key promotions in securitisation

This week’s roundup of securitisation job swaps sees O’Melveny launching a cross-disciplinary special credit and liability management group. Elsewhere, Investec has appointed a senior originator within its global fund solutions team, while Sona Asset Management has appointed a London-based md and head of credit strategy. 

O’Melveny has formed a new cross-disciplinary special credit and liability management group, reflecting growing client demand for integrated, end-to-end support across the credit cycle, particularly as capital solutions become increasingly complex and bespoke. The group draws on O’Melveny’s strengths in front-end lending, M&A, capital markets, corporate governance, bankruptcy and restructuring, and litigation. 

Securitisation partners Howard Goldwasser and Skanthan Vivekananda are involved in the group. With over 30 years of experience, Goldwasser has covered a broad array of sectors - including traditional and esoteric asset classes – but now mainly focuses on the US CLO space. Vivekananda’s practice focuses on structured finance and derivatives, representing banks and securitisation sponsors in connection with the formation and structuring of cash and synthetic CLOs and other types of securitisation vehicles, as well as other types of credit-focused investment funds. 

Meanwhile, Investec has appointed Richard de Villiers as senior originator within its global fund solutions team in New York. He brings expertise in capital call facilities, NAV-based lending, and hybrid solutions, and will focus on delivering tailored financing support to private equity, venture capital, and credit managers across North America.  

De Villiers most recently served as director and wealth consultant at First Citizens Bank (formerly SVB Private), advising clients across the private capital ecosystem since 2022. Prior to that, he held senior roles at UBS as an international financial advisor (2019–2022) and at JPMorgan Chase as vp in the financial sponsors private banking team (2018–2019). His appointment signals Investec’s ongoing commitment to scaling its global fund solutions platform, which now has a team of 40 professionals across the UK, Europe, South Africa and the US. 

Sona Asset Management has hired Craig Nicol as md and head of credit strategy, based in London. Nicol leaves his role as European high yield strategist at Barclays after spending three years with the bank. He previously spent eight years at Deutsche Bank. Sona has US$12.2bn in AuM across four credit strategies, including CLO, SRT, capital solutions and “all-weather” long/short. 

Ashurst has hired Norton Rose Fulbright partner Joe Giannini as a banking and finance partner in its global loans team, based in New York. Giannini leaves Norton Rose Fulbright after eight years with the firm, having previously spent 16 years at Chadbourne & Parke. His practice primarily focuses on secured and unsecured lending transactions including syndicated credit facilities, working capital facilities, structured finance arrangements and cross-border transactions.  

The TCW Group's Vincent Sokhanvari has joined Payden & Rygel as senior vp for securitised investments – CMBS/CRE, based in its Los Angeles office. He leaves his position as vp focusing on fixed income, structured credit and CMBS at TCW after three and a half years with the firm, having previously had stints at Latch, Bellwether Asset Management, Rialto Capital Management and Moody's Corporation. 

And finally, Cushman & Wakefield has hired JP LeVeque as executive vice chair, as part of the expansion of its equity, debt and structured finance efforts in the western US region. Based in the San Francisco Bay area, LeVeque leaves his role as md at Eastdil Secured, where he spent around 20 years and primarily focused on structured financings, preferred equity and loan sales across multiple major property types. 

Corinne Smith, Marta Canini, Kenny Wastell