Contents

ABS

SCI in Focus: Cloudy days for US solar market

Sunnova/Mosaic bankruptcies illuminate sector frailties

Holders of ABS issued by Sunnova and Mosaic, both of which filed for chapter 11 at the beginning of last month, will be protected by bankruptcy remote SPVs, but the events have shuddered the US solar market and issuance in 2025 will be well down on recent years.

Fitch Ratings notes that “bankruptcy proceedings may lead to weaker asset performance as borrowers, contractors and installers respond the headlines and navigate sector shifts,” while a report by the Structured Finance Association (SFA) dated June 20 said “..The recent wave of bankruptcies and sector-wide underperformance are weighing on what was once a bright spot in esoteric ABS.”

Various classes of recent issues from Mosaic have been downgraded or placed on negative watch while tranches sold by Sunnova have been downgraded or placed by negative watch by Fitch. In addition, B and C tranches sold in 2023 by GoodLeap have suffered the same fate.

Research by the SFA indicates issuance this year so far has totalled only US$1.5bn, compared to US$4.9bn last year, US$4.2bn in 2023, US$4bn in 2022 and US$3.2bn in 2021. Given the shift in sentiment, significant issuance in the second half of 2025 is not expected. KBRA expects another US$1bn in the remainder of this year, according to Ken Martens, an md in KBRA’s ABS Ratings group.

“It seems there might be now an increased cautiousness about this asset class on the back of recent events,” says Gregor Burkart, senior vice president of asset financing at Enpal, a German renewable energy equipment company based in Berlin.

While it would be tempting to attribute these difficulties to the change of personnel in the White House and the reduction of financial benefits, this appears of minimal immediate impact. The One Big Beautiful Bill Act (OBBBA), passed on June 16, does not terminate the 30% tax relief for homeowners who have installed solar systems until December 31 2025.

The weaknesses of Solar and Sunnova long predate shifts in policy; neither do they apply only to these two companies. ““They (Sunnova) had an aggressive business model where you’re basically gambling relying on originations being sustained. There was a growth focus to get more originations. This is not just a Sunnova problem either,” says Simar Jolly, the primary corporate analyst for Sunnova at Fitch.

These problems, however, only partially apply to Sunrun, which is currently poised to sell a US$480m ABS, its second of this year, designated Sunrun Pangea Issuer 2025-2. This deal consists of a US$331m A-1 tranche, rated A-, a US$100m A-2 tranche, also rated A- and a small US$50m B tranche rated BB-.

As of December 31 2024, delinquencies of more than 120 days past due represented only 0.28% of receivables. “The portfolio’s performance reflects the Company’s underwriting, loss mitigation and collection practices and their system design and installation oversight,” says KBRA. The weighted FICO average of the customer base is 757.

Low rates, high rates

Expansion by solar financing firms like Sunnova and Mosaic was funded by securitisation, tax equity financing and corporate debt. The loans they offered to customers were most often contracted at very low rates of interest, like 0.99% and 1.09%, which they felt obliged to maintain. The floating rate liabilities, however, grew more and more costly as rates rose. Asset books were underhedged and there was a serious mismatch.

“So the deficit widens and your dealers are still waiting for payment,” says Jolly.

Lower than expected prepayments also represented a particular headache. Many solar ABS deals relied on prepayments to build over-collateralization and to maintain credit enhancements. Slower prepayments prolonged maturities of deals, decreasing cash flow while increasing credit risk.

It seems some borrowers were not using their 30% tax credits to prepay the loans. “If your borrowers don’t use the 30% tax credits to prepay loans, installments would typically increase at month 18. Lower prepays can exacerbate the negative impact of excess spread in the structures,” notes Pasquale Giordano, senior director in structured finance at Fitch.

Demand has also fallen sharply. Residential solar installations in the US fell 32% from 2023 to 2024, to the lowest level since 2017, according to the SFA. California is the biggest market for solar panels in the USA and the net metering change in April 2023, designated NEM 3.0, didn’t help.

This legislation introduced a 75% reduction in export rates (the value of excess electricity pushed onto the grid by solar systems), thereby reducing the overall savings derived from home solar panels. The policy was designed to encourage homeowners to combine battery storage with their solar panels to become more self-sufficient, but had the net effect of making solar panels significantly less attractive.

It also is said to have contributed to the increase in borrower defaults as the solar panels failed to deliver appreciable savings in utility bills, which was a key selling point when loans were originated. Electricity rates in California are often low anyway, so panels frequently did not live up to expectations.

“The solar industry has faced headwinds in recent years, driven by a combination of rising interest rates and regulatory changes (most significant change prior to OBBBA was NEM 3.0 in California).  The passage of OBBBA is generally negative for the industry and will increase financial pressure on companies operating in the solar sector,” says Martens of KBRA.

To conclude, the US solar market is now viewed as having serious structural flaws. Some financing providers, like Sunrun, have a somewhat different model, but others are affected in the same way. “In the US, providers were focused on growth. There was a strong growth trajectory in the late 2010s, with an aggressive strategy to grab market share. At one point they were accepting loss making originations to get market share. No revenue was being generated and that is not sustainable,” says Bukart.

But he stresses, the European business model is quite different. Firms like Enpal target customer costs to be the same or less with solar panels than with the grid, and loans are offered over the 25-30 year life of the panels. Solar business does not depend on any form of grants or subsidy, he says.

Later this year Enpal is expected to go into the market with its second ABS transaction, dubbed Golden Ray II, for between Eu250-300m and Bukart predicts a warm reception.

“I am confident that our second issue, Golden Ray II, will demonstrate a continued high demand for this asset, also as comparable US investment opportunities will now be scarce,” he says.

Its initial offering, the Eu240m Golden Ray II sold in October 2023, was nine times over-subscribed.  

Simon Boughey

CLOs

CLO issuance surges past midyear milestones as market eyes record 2025

US and European volumes race ahead of forecasts, with analysts predicting a strong finish despite volatility risks

The CLO market is moving at a vigorous pace, with many market analysts revising their projections upwards for the rest of the year. As of end of June, the number of CLO deals stands at 670, beating out the record-breaking rate recorded last year (553 as of June 2024). 

According to SCI data the combined issuance from the US and Europe* has just surpassed US$320bn, already over halfway towards beating 2024’s all time issuance highpoint of nearly US$600bn. 

Moreover, if there is a strong end to the year - as we saw in 2024 - this year could break the record by a considerable margin, market analysts say. 

The European CLO market, with a current value of €52.8bn as of June 2025, has also shown a strong performance this year, with issuance on track to hit Deutsche Bank’s forecasts, according to the bank’s CLO Monthly Report published at the start of July. 

New issuance in the region has already ticked over the €30bn mark (€31.3bn according to SCI data) and is 24% ahead of the comparable period last year, according to Deutsche Bank. 

This also pushes European new issues more than halfway towards the €50bn supply projected by both Deutsche Bank and JP Morgan in its 2025 midyear outlook published in June, despite the uncertainty caused in the aftermath of the “Liberation Day” tariff announcements. 

It looks like the market recovered from this shock relatively quickly, however, with Conor O’Toole, head of European securitisation research at Deutsche Bank, stating that, “if issuance continues uninterrupted at the current run rate, risks to our €50bn forecast will pivot to the upside - a dramatic turn from the depths of April.”

Refi/reset activity in Europe stands at €21.2bn, according to SCI data, which aligns with Deutsche Bank’s year end projection of €42bn, whereas JP Morgan is slightly more optimistic and maintains its €50bn prediction. 

JP Morgan notes that the proportion of callable deals in Europe is relatively high, at 57% last month, and is expected to rise to 70% by the end of the year, offering further reason to be bullish on refi/reset activity in the region through the rest of 2025. 

Resets outperform new paper but spread widening hinders refi’s 

In the US, as of June 2025, primary issuance stands at US$261.1bn, composed of US$103.1bn in newly issued paper, US$106.1bn in resets, and US$48.9bn in refi activity. 

JP Morgan says resilient loan supply and managers’ commitment to growing AUM means it is reverting to its original forecast of $180bn for the US CLO market, up from its previous /US$150bn projection, although it assumed a slower trajectory through year-end compared to the busy start to the year. 

Strong refit/reset activity (US$155bn) in the market is currently on track to match record refinancing levels set in 2024.  

At the start of the year, although the sharp rate cuts seen towards the end of last year did not continue, they remain substantially lower than their local peaks in Europe and the US.  

Discussing his outlook for CLO resets in January 2025, Olivier Pons, senior portfolio manager at AXA says he expects resets to continue to increase.

Yet JP Morgan highlights a number of constraints that could cause refi/reset activity to slow through the rest of 2025. 

The report states that although the reset/refi market has remained active through the first half of the year, raising its US forecast to US$220bn, it warns this might be prone to spread volatility that could lead reset and refi activity to drop off the record pace set in 2024 later in the year. 

Just 35% of the US BSL CLO market is out of its non-call period compared to roughly 60% of BSL CLOs at the same time in 2024, according to JP Morgan, with a diminishing number of these deals being in-the-money for refinancing if spreads rise from the 130 bps region to 150 bps.  

For example, the report highlights the 70% drop in April volumes after triple-A spreads widened by 10.5bp following the US tariff announcements as a reason to exercise some caution, labelling this event a “cautionary tale if recession risks were to become more elevated and spreads widened out more than expected”.  

* Total issuance converted using current exchange rates 

Solomon Klappholz 

Asset-Backed Finance

SCI in Focus: ABF momentum builds as esoteric assets go mainstream

NorthWall and DoubleLine push beyond bank retrenchment into niche credit

Asset-Backed Finance

Brazil's private credit growth attracts global investment giants

KKR joins rush into Brazil's expanding private credit market

Brazil's structured credit market is experiencing sustained growth, with private credit funds capturing R$323.1bn in net inflows during 2024. This momentum, driven by regulatory changes and the rising popularity of the asset class, is also prompting global investment giants to seek strategic partnerships with local players.

Reflecting this appetite, KKR, the US$664bn investment behemoth, has recently formed a strategic partnership with Itaú Asset Management, one of Brazil's largest managers, overseeing US$198bn in assets under management (AUM).

"There is significant growth potential for the internationalisation of Brazilian portfolios. Historically, most capital has been invested domestically, with international alternatives being notably underpenetrated,” says Carlos Augusto Salamonde, partner and head of global asset management at Itaú.

The alliance aims to leverage Itaú's alternatives platform, which currently manages US$14.8bn across private credit and liquid and illiquid alternative strategies, whilst tapping into KKR's global network of institutional investors interested in Latin America.

Securitisation gains traction

One of the key drivers of the expansion of credit ecosystem in Brazil is the growing use of securitisation technology. Julia Nunes, director of structured finance at Fitch Ratings Brazil, explains that recent regulatory reforms have facilitated access to some of these instruments.

She also notes that, while high interest rates typically attract investors to more traditional fixed-income products—such as government bonds, bank notes or money market funds—securitisation has continued to gain traction despite the challenging environment.

“We can see that the stock of FIDCs and other securitisation instruments in Brazil continues to grow, supported by new regulations that have simplified the rules and made new types of securitisations viable, and despite the high interest rates that naturally attract many investors to more traditional fixed income instruments,” she says.

A recent report from ANBIMA, the Brazilian capital markets association, shows that the number of private credit funds has jumped 49% since the end of 2023, reaching 2,070 funds that now constitute 7% of Brazil's investment industry. In terms of AUM, these funds now account for 12% of the sector, an increase of two percentage points from 2023.

While securitisation currently represents only a small fraction of Brazil's overall credit market, Nunes sees considerable promise for expansion for the upcoming years.

"The sophistication of the instruments, the role of credit rating agencies, and the popularisation of FIDCs, as they become eligible for individual investors, should contribute to making these tools increasingly sought after by companies and financial institutions," explains Nunes.

Nonetheless, Brazil still appears to be taking measured steps to secure its place among other global sovereign issuers. In 2024, Brazil's investment fund industry closed with positive net inflows of R$60.7bn, reversing two years of negative results.

Data from ANBIMA highlights that this recovery was largely spurred by fixed income funds, which attracted R$243bn in net inflows in the past year, compared to R$58bn in outflows witnessed in 2023. Within this segment, funds with 50-70% private credit exposure recorded the highest net inflows of R$113.3bn between January and November2024.

"Despite the challenges faced by some categories, the resumption of positive net inflows after two years of negative results is a demonstration of the solidity and resilience of our fund industry," says Pedro Rudge, director at ANBIMA, in the report. "For 2025, fixed income funds should continue driving the sector's results, considering the prospect of rising Selic rates (Brazilian economy reference interest rate)," he completes.

Brazil’s structured credit expansion aligns with global trends. As outlined by Preqin's Future of Alternatives 2029 report global alternatives are forecast to rise past US$30trn by 2030, with a total AUM of US$29.22tn by the end of 2029, up 74.1% from US$16.78tn at the end of 2023.

Marina Torres

Asset-Backed Finance

US esoterics: up and ever up for digital infrastructure - video

Kirkland & Ellis's Mellecker speaks to SCI about developments in the digital infrastructure market

Kelly Mellecker, a partner at Kirkland & Ellis in New York, chats to Simon Boughey, SCI US editor, about recent developments in the digital infrastructure market - the MVP of the esoteric sector. She talks us through seemingly irresistible momentum in the data centre and fibre classes, the likely impact of the capex needs of AI and the pros of cons of the private market versus the structured finance route for borrowers.

Simon Boughey

Asset-Backed Finance

Funding Circle and Deutsche Bank ink £200m deal to boost UK SMEs

Forward-flow agreement secures funding for small businesses, backed by AI-driven credit models

Funding Circle, one of the UK’s largest SME lending platforms, has announced a £200m forward flow agreement with Deutsche Bank, solidifying a decade-long partnership aimed at expanding credit access for UK small businesses through its Core Term Loan product.

“Transactions such as these help provide well-needed funding for the UK real economy, of which small businesses play a key role,” says Dipesh Mehta, chief capital officer at Funding Circle. “This facility helps us secure our funding needs to maintain and increase our lending to small businesses at a competitive rate.” 

While specific terms remain confidential, the deal follows a common direct lending forward flow structure, where Deutsche Bank acts as one of several institutional investors on the platform. Funding Circle’s role is to connect investors with creditworthy small businesses.

“The economic risk and reward is for the institutional investor,” explains Mehta. “Funding Circle provides these investors with robust, stable and attractive returns.”

Powered by proprietary technology and AI-driven risk models developed over 15 years, Funding Circle’s credit assessment engine is designed to outperform traditional lending benchmarks. 

“Our current model is three times more powerful at differentiating between high and low-risk borrowers than standard bureau models,” explains Mehta. “This results in more accurate lending decisions, a fast and easy customer experience with 77% of applications receiving an instant decision, and a significant commercial advantage.”

The latest partnership with Deutsche Bank comes amid rising investor demand for exposure to UK SME credit. 

“We have announced a number of transactions across Funding Circle’s multi product small business offering over the last 12 months, and this signals the confidence investors have in the UK small business environment, and Funding Circle’s ability to provide access to this asset class. We have also seen an increase in the number of public securitisations backed by small business lending products, which further highlights the investor appetite in this area,” notes Mehta. 

Funding Circle’s Term Loan originations surged 33% during fiscal year 2024, supported by a broader product offering, which includes FlexiPay and a new business credit card – designed to give SMEs greater flexibility and control over cash flow.

This renewed commitment from Deutsche Bank, alongside broader ongoing investor confidence, underscores the crucial role of innovative fintech platforms, such as Funding Circle, in supporting the UK’s SME ecosystem.

Marta Canini

CLOs

Reckoner unveils first leveraged triple-A tranche CLO ETF

The actively managed vehicle deploys financial leverage to double the fund's exposure - typically targeting 200% of net assets

Reckoner Capital Management has launched the Reckoner leveraged AAA CLO ETF (RAAA), its first US-listed fund providing leveraged exposure to triple-A rated CLO debt tranches through an ETF wrapper.

RAAA is among the first structured credit ETFs to offer leveraged exposure to senior CLO tranches, traditionally the domain of institutional investors, the firm says.

The fund aims to provide investors with yield enhancement by using leverage to boost income potential above that of standard triple-A CLO ETFs. Its floating rate profile tied to benchmark interest rates offers value in a shifting rate environment, helping to preserve purchasing power. Additionally, the ETF structure brings the traditionally private CLO market into the public sphere, enhancing access, transparency, and daily tradability for a broader range of investors, according to the firm.

Based in New York, Reckoner - founded in October 2024 - points out that it is managing RAAA in a “conservative manner”, with the aim of enhancing yield slightly for investors without incurring wider risk.

The firm’s CEO, John Kim tells SCI: “Triple-A CLOs are very liquid bonds with  massive bid depth. Financing is regularly available for this asset class, and we believe it is big enough to support a modest amount of leverage. Leverage in RAAA will be limited to 50% of the portfolio or a 1:1 debt-to-equity ratio by borrowing through short-term repurchase agreements – and actively managed by increasing leverage during periods of economic stability and reducing it during periods of market volatility.”

Positioning in the structured credit landscape

Reckoner positions RAAA within an expanding cadre of CLO-focused ETFs. It joins competitors such as BlackRock’s CLOA and RBC’s RCLO, but distinguishes itself through its leveraged triple-A focus, as “there is still limited differentiation among triple-A CLO ETFs”, Kim says.  

Kim also says the firm uses a data-driven approach to select bonds based on the investment skill, process, track record, reputation, and risk appetite of CLO managers. “Within RAAA, we are focusing on tier one CLO managers, high bid depth, and widely traded bonds with high ownership.”

Leveraging triple-A CLO tranches introduces compounding effects on both gains and losses, the firm adds. The fund uses derivatives (e.g: repos, swaps) and may face margin calls, adding complexity atypical of traditional CLO or bond ETFs.

RAAA follows Reckoner’s recent Form N–1A registration filed in May and coincides with the firm’s intention to launch a leveraged, investment-grade focused ETF later in the year, the firm says.

Kim states: “We plan to introduce different fund structures that provide value to a wide variety of investors, including a broader array of CLO ETFs for individual investors, UCITS funds for non-U.S. taxpayers, SMAs for institutional investors, and other formats.”

RAAA is led by portfolio managers Kim, Tim Wickstrom, and Jared Finsterbusch.

Key ETF Features

• Leverage: Up to 100%, achieved via repo, swaps, and similar instruments
• Credit focus: Minimum 80% allocation in triple-A rated CLO debt; up to 20% in AA/A-rated tranches permitted
• Currency: USD-denominated only
• Issue size requirement: Only CLO tranches with at least US$250 million outstanding qualify
• Management fee: 0.30% per annum
• Risk rating: Bloomberg ESR-designed “ESR-Invested” rating reflecting investment-grade structured credit exposure

In May, US asset management firm, Lord Abbett, said CLOs - particularly triple-A rated tranches - are now drawing outsized flows due to their low-rate sensitivity, robust credit performance, and the rise of ETF wrappers.

Ramla Soni

ABS

Regulatory reform set to 'begin delivering'

European ABS on the cusp of a steady but meaningful evolution

European public securitisation volumes are expected to start building steadily over the next five to seven years, as long-awaited regulatory reform finally begins delivering. The evolution of the market is also likely to receive a boost from the emerging intersection of green finance and ABS.

The European Commission’s proposed changes to the Capital Requirements Regulation (CRR) and the treatment of securitisation under the Liquidity Coverage Ratio (LCR) for banks represents a potential turning point for the European ABS market, according to Guillaume Jolivet, chief analytical officer at Scope Ratings. “These proposed changes indicate a clear and forceful will to enable securitisation to play its part in refinancing and funding Europe. Enabling European insurers to participate more actively will be a game-changer,” he says.

He adds: “I think Europe will experience a steady build-up of public securitisation volumes over a five- to seven-year horizon, bearing in mind regulatory implementation will take several years before it becomes fully effective.”

Jolivet suggests that the biggest impact from the regulatory changes will likely be felt in STS ABS. “Liquid senior tranches will be the ABS investment of choice for large insurers. This would give a boost to granular securitisations.”

Another driver of growth – as well as potential innovation - lies in the emerging intersection of green finance and securitisation. Although still relatively new to the European market, the concept of bundling solar and renewable energy assets into ABS deals is gaining traction.

Indeed, Jolivet indicates that the first renewable securitisation transactions are likely to hit the market within the next 12 months.

Elsewhere, President Trump’s imposition of tariffs appears to have had a limited direct impact on the European ABS market to date. “We have not seen major disruption regarding the flow of new ABS transactions, or at least not for any period of time,” Jolivet confirms. “Asset classes in credit closest to equity markets were most affected. For example, CLOs were more exposed than ABS in that sense.”

Overall, sentiment is stabilising among ABS investors. “There are no strong negative signals pointing to performance deterioration in the underlying asset classes, which should be supportive for investor sentiment,” Jolivet notes.

However, investors are keeping an eye on commercial real estate refinancing risks and volatility around interest rates. “Certain investors are applying some cushions,” he adds, referring to how market participants are accounting for potential asset quality deterioration due to higher financing costs.

Amid this shifting backdrop, Scope is positioning itself as a European alternative in a fragmented global landscape. “Current geopolitical turmoil and deepening fractures in the transatlantic relationship bring Europe's strategic autonomy into sharper focus,” the rating agency states. “This is where Scope Ratings offers an interesting alternative for issuers and investors across all credit segments.”

Matthew Manders

ABS

New GW&K fund targets retail securitized buyers

B3E still deters bank buyers of agency MBS

Boston-based investment manager GW&K last month unveiled a new investment grade securitized fund targeted at separately managed accounts (SMAs) and is evidence of the increased reach and popularity of structured finance instruments.

The GW&K Securitized Bond SMA Shares is designed to allow retail buyers greater access to securitized instruments, explains portfolio manager Brendan Doucette. It is invested in all the securitized sub-sectors, such as agency MBS, ABS, conduits, RMBS, CMBS and CLOs.

Currently sized at US$110m, the firm hopes it will be worth US$500m in a year’s time. “We’re definitely seeing more interest. Retail accounts often can’t invest in the whole securitized market. This is an option to get them that exposure to the full array of securitized products beyond agencies, MBS and CMBS,” says Doucette.

He manages a US$1.9bn portfolio, 85% of which is invested in agency MBS. This is a slight diminution from the 90% proportion given over to agencies at the end of 2024, which is due to the amount now given to the new fund.

The spectre of Basel Three Endgame (B3E) continues to hang over the agency MBS market. It had been hoped at the end of last year that bank accounts would return to the space, but this has not materialized and Doucette attributes this absence over lingering concern about the impact of B3E to capital requirements.

“Everyone is looking for B3E, and this has held off bank demand. This is what the market is really looking for, but it looks like there won’t be a resolution this year,” he says. Hopes were raised with the news of the reduction of the supplementary leverage ratio (SLR) for GSIBs at the end of last month and the lifting of Wells Fargo’s US$1.95bn asset cap at the beginning of June, but no concrete news about B3E has emerged. This is said to be continuing to hold back bank buying of agency MBS paper.

Bank portfolios have been net sellers of agency MBS paper to the tune of US$25bn in H1 2025. Trading accounts, on the other hand, are up US$140bn, but these are not buy and hold accounts and don’t represent enduring demand.

Meanwhile technicals in the MBS agency have been improved by the sluggish housing market and limited refinancing due to continuing higher rates, but reduced supply has not been met by more robust demand.

Neither has ongoing quantitative tightening (QT) had much negative impact on spreads. About US$15bn is running off the Fed’s balance sheet per month, which is easily absorbed by the market. Some US$70bn of net supply was seen in H1, lower than expected, and another US$50bn or so is anticipated in H2, says Doucette.

Due to reduced demand, interpolated nominal spreads in agency MBS are around plus 147bp currently, some 18bp wider than at the end of 2024. Spreads hit a yearly high print of plus 164bp in the wake of Liberation Day, while the Bloomberg MBS Index hit 49bp in the wake of April 2 and is now plus 46bp – further evidence that the tariff furore has – thus far – been a storm in a teacup.

Mortgage asset performance has varied significantly according to where it sits in the coupon stack. Thirty-year 6.5% mortgage bonds have gained 78bp year to date, while lower coupon assets, such as 30-year 2% notes have had returns of minus 23bp – a difference of over 100bp.

“This dynamic will play out for the rest of the year. It’s a good year to earn carry because of the benign prepayment climate. And as rate cuts have been pushed out till later in the year, it’s good for the current coupon,” says Doucette.

Simon Boughey

Asset-Backed Finance

Balbec rapidly deploying Fund VI amid mortgage and consumer debt surge

Asset-based credit firm leans into smaller, operationally complex deals while scaling CRE debt strategy and targeting Q4 Spanish RPL securitisation

Balbec Capital is ramping up activity across all corners of the residential loan market, CRE loans, consumer NPLs and secondary portfolios from struggling lenders, after having deployed over half of its sixth flagship fund. Despite a tough fundraising climate, the firm raised more than expected for Fund VI, as demand for niche, cash-flowing credit strategies continues to grow.

“We weren’t immune to the sluggish fundraising climate the past two years, but strong deployment and DPI won over LPs,” says Peter Troisi, ceo of Balbec. “Sending back cash every month makes it a lot easier for LPs to recycle into the next fund.”

Founded in 2010, Balbec has grown into a 150-person platform focused on hard-to-access, often overlooked corners of the US$18trn global consumer and mortgage debt markets, and their Western Europe analogues. The firm has made over 4,500 unique investments since inception, spanning from performing to non-performing residential loans to mortgage servicing rights (MSRs), control-class SASB CMBS, consumer NPLs and Chapter 13 bankruptcy portfolios.

“We’re very asset-management intensive. Our edge is in sourcing, diligence and servicing. We go deep – residential mortgage loans of all kinds, from performing to non-performing, MSRs, RMBS,” explains Troisi.

While many private credit giants chase scale via US$500m-plus allocations, Balbec has taken the opposite route – deploying capital across hundreds or even thousands of smaller, idiosyncratic trades, often from one-off sellers or struggling lenders.

“Most of our peers chase large, headline deals. We’re surgical,” notes Troisi. “Last year, we made over 1,200 investments – that’s typical for us. In a fragmented market, that’s where the inefficiencies and alpha live.”

To manage that volume, the firm leans heavily on proprietary technology built by its 15-person expert engineering team. The internal system supports real-time pricing, diligence and portfolio surveillance, all of which becomes a core feature of investor due diligence.

“We’re not reinventing the wheel each time. Whether the mortgage is performing or not, the data, the vendors, the process – it’s consistent. That’s what makes our model scalable,” says Troisi.

Fund VI
Roughly 70% of Fund VI will be deployed in the US, with the remainder spread across Western Europe, primarily in Spain, Portugal, Ireland and the UK, where NPL opportunities have begun to re-emerge. Balbec has already deployed north of 60% of the capital.

“Rising consumer delinquencies are expanding the opportunity set. We’re seeing that in the US, but also in Portugal and Spain,” explains Troisi.

One of the firm’s expanding opportunity sets is CRE lending, particularly transitional loans originated in 2021-2022, many of which are now maturing without viable refinancing options aside from Balbec and a few peers.

“You hear the phrase ‘survive until 2025’...well, it’s 2025,” notes Troisi. “Borrowers are struggling; lenders aren’t extending terms. That’s where we step in, requiring fresh sponsor equity and structuring new terms.”

The firm is also active in the secondary CRE loan market, buying discounted portfolios or one-off assets from banks and lenders seeking offload solutions. On the securitised side, Balbec has been buying control classes down the CMBS capital stack, where valuation dislocations persist.

Though rooted in private markets, Balbec has developed a strong public-market execution arm, issuing more than 80 securitisations in the US under its PRPM shelf since 2015. “It’s a core part of our strategy: developing public market liquidity for assets that we originate and manage in private markets,” explains Troisi.

In Europe, these deals require much more lead time. Balbec recently completed a reperforming loan (RPL) deal in Spain in April, after approximately a year of preparation, with another planned for Q4.

“What investors value the most is consistency. We issue securitisations in good times and bad. Timing the market isn’t the game. Being reliable is,” notes Troisi.

Of the over 4,500 unique investments Balbec has made since 2010, only 42 are expected not to recover their full principal, according to the firm. “Our underwriting is tight. We build in cushions, and we stress-test. And if we miss a few bids because we over-stress, we can live with that,” he adds.

Looking ahead, Balbec is not pursuing growth into unfamiliar sectors, such as litigation finance or other flavours of the asset-based markets. Instead, it's doubling down on the strategies it knows best.

“Residential mortgage credit is still massively under excavated. We’ve got the shovels out, and we’re still digging,” says Troisi. “We’ve narrowed to five or six core markets – we’re not trying to be everywhere.”

The firm has historically invested in 23 countries, but has since consolidated its footprint to geographies where deal flow is scalable and sourcing networks are strongest.

“Fundraising is the lifeblood of any asset manager,” notes Troisi. “But you only get allocator shelf space if you have a compelling, consistent product. We fight harder because we’re not a mega fund, but that also forces us to innovate and differentiate.”

Although no date has been set, a seventh flagship fund may be on the horizon. “It’s always on our mind. And given our cadence, it’s probably not too far off,” says Troisi.

Marta Canini

Structured Finance

Job swaps weekly: Man Group snaps up Bardin Hill

People moves and key promotions in securitisation

This week’s roundup of securitisation job swaps sees Man Group acquiring US private debt manager Bardin Hill. Elsewhere, Moody's Ratings has appointed a global head of its financial institutions group, a global head of its structured finance group and a global co-head of insurance, while transitional leadership appointments have been announced ahead of the merger between two subsidiaries of BNP Paribas and AXA Investment Managers. 

Man Group is set to acquire Bardin Hill, a US private credit manager with approximately US$3bn in AUM and a management team with an average industry tenure of 22 years. The firm’s opportunistic credit platform focuses on US distressed and special situations investments and US non-sponsor backed direct lending, while its performing credit platform focuses on broadly syndicated loan CLOs. 

Bardin Hill ceo Jason Dillow will continue to lead the Bardin Hill business with the support of its nine partners, including its executive committee members Philip Raciti and Jacob Fishelis. Bardin Hill’s investment committee, investment team and investment processes will remain in place, and Man Group’s global distribution capabilities will enhance the firm’s access to new investors. 

The acquisition bolsters Man Group’s overall credit platform - which currently comprises nearly US$40bn of AUM, over 10 specialist investment teams and 100-plus credit professionals - by adding opportunistic and performing credit strategies designed to provide consistent risk-adjusted returns. It also further expands Man Group’s footprint in the US, aligned with the firm’s strategic priority to grow its presence in North America.

Elsewhere, Moody's Ratings has appointed the incumbent global head of its structured finance group, Annabel Schaafsma as global head of its financial institutions group. Navneet Agarwal, who previously led Moody’s US structured finance business, will take over as global head of the structured finance group.

Schaafsma is based in London, and will be responsible for analytic teams covering banks, finance companies, insurers, and funds and asset management globally. She has been with the ratings division of Moody's for 15 years, having previously worked at Standard Chartered, Moody's Investor Service, and Credit Suisse.

Agarwal has been with the agency for 22 years and is promoted from the role of md and analyst. He is based in New York.

Moody’s has also promoted Antonello Aquino to global co-head of insurance and head of funds and asset management, leading the insurance business in the US and EMEA regions. He will work alongside global co-head of insurance for the APAC region, Sally Yim.

Transitional leadership appointments have been announced further to the planned legal merger of BNP Paribas Asset Management (BNPP AM), AXA Investment Managers and BNP Paribas Real Estate Investment Management (BNPP REIM) until the implementation of the final operating model.  

Isabelle Scemama will lead the combined alternatives capabilities, across AXA IM Alts, AXA IM Prime, BNPP REIM and BNPP AM’s private assets, in addition to her current role as global head of AXA IM Alts. This combined structure brings together over €300bn in alternatives AUM, across real estate, infrastructure, private debt & alternative credit and private equity, establishing the largest alternatives investment management platform in Europe. 

Meanwhile, Rob Gambi will lead the combined liquid investment capabilities, across AXA IM Core and BNPP AM, in addition to his current role as global head of investments at BNPP AM. The combined structure for liquid strategies represents over €1trn AUM, with close to €700bn in active fixed income.

Scemama and Gambi are reporting to Sandro Pierri, ceo of AXA IM and BNPP AM.

EverBank has bolstered its ABF team with the appointment of three executives from CIBC US. JJ Ohlrich and Shawn Bastic have been recruited as directors, while Ryan Mannell has been hired as associate. All three will join EverBank’s lender finance team and be based in Chicago. 

Ohlrich joins the bank after a decade at CIBC, where he was most recently md and market lead within the specialty finance division. Bastic leaves his position as md and senior group diligence manager at CIBC after six years with the business, having previously worked at Starboard Specialty Funds and the Federal Reserve Bank of Chicago. Mannell joined the Chicago-based bank in 2020 as an analyst and worked his way up to associate md over the course of five years.

Rick Hanson has joined Simpson Thacher & Bartlett as a partner, based in London. He has over 20 years of experience advising alternative investment funds, asset managers and insurance company investors on structured finance, securitisation and bespoke private credit financing solutions. Hanson was previously a partner at Cadwalader, which he joined in November 2024 from Morgan, Lewis & Bockius.

UBS has hired Maria Pristupova as head of securitised products origination, based in New York. She joins UBS from Guggenheim Securities where she was senior md - structured products investment banking since 2013. In her new role, Pristupova will focus on a "variety of non-traditional asset classes", according to a statement.

Renato Limuti has joined consultancy firm BIP’s corporate finance & strategy team as partner and global head of alternative investors and private debt. Based in Milan and with over 20 years of experience in investment banking, he was previously md and head of the Italian credit portfolio advisory and financial institutions group at Alantra, where his remit included structured credit, NPEs, real estate and non-core assets. Prior to that, Limuti was an associate partner at EY.

NIBC has named Dirk van den Beukel md, head of mortgages, based in the Hague. He was previously md, head of NIBC Vastgoed Hypotheek, having joined the bank in June 2005 as senior portfolio manager, CMBS & RMBS. Before that, van den Beukel was a founding member of Capital Tool Company, a start-up that utilised securitisation technology in trade receivables financings.

UniCredit has appointed Benedetta Piva as director - fund financing origination. Piva, who is based in Milan and has been with the bank for 13 years, transitions from her role as director - structured equity and credit financing trader.

Simmons & Simmons has promoted Matthew Caley to managing associate, structured finance and derivatives. Based in London, he joined the firm as a trainee solicitor in August 2016 and advises banks, financial institutions and corporates on various forms of asset-backed structures in respect of a wide range of assets.

Real estate debt advisory Art Capital has recruited David McMurtry as an associate, based in London. He brings both credit and advisory experience across the UK and Europe, having previously served as an analyst at Birchwood Real Estate Capital, which he joined in October 2022.

And finally, Starwood Property Trust (SPT) is to acquire Fundamental Income Properties, a fully integrated net lease real estate operating platform and owned portfolio, for approximately US$2.2bn. The acquired portfolio consists of 467 properties spanning 12 million square-feet across 44 US states, 56 industries and 92 tenants.

Currently owned by Brookfield Asset Management, Fundamental operates a vertically integrated net lease real estate investment business led by a 28-person team that brings comprehensive capabilities across origination, credit and real estate underwriting, portfolio management and capital markets. The firm executes its acquisitions through strong relationships with middle market companies and private equity sponsors across a variety of industries.

The transaction positions SPT to capitalise on anticipated growth in transaction volume, expand its access to proprietary credit investment opportunities and provides access to specialised ABS financing markets.

Corinne Smith, Ramla Soni, Kenny Wastell