Contents

CLOs

CLO triple-As above par as discount margins rise with WALs

Poh-Heng Tan from CLO Research highlights BSL CLO triple-A term curve slopes upward, unaffected by manager tiering

Between 8 and 12 August, more than 10 BSL CLO triple-A tranches still within their non-call periods changed hands, with every bond trading above par.

The graph below shows that, across bonds managed by managers of all tiers, discount margins (DMs) to call rose in step with weighted average lives (WALs) to call, forming an upward-sloping term curve.

For tranches with a WAL to first call between 0.65 and 1 year, DMs to call ranged from 88 to 104 bps. For those with a WAL to call between 1 and 1.65 years, DMs ranged from 106 to 124 bps.

Source: SCI, Clo Research

Asset-Backed Finance

Back-leverage deals drive UK CRE recovery as continental Europe stalls

Debt funds lean on bank back-leverage to scale, preparing to navigate Europe's looming CRE maturities

The recovery in Europe’s commercial real estate (CRE) lending market is proving patchy, with the UK pulling ahead while much of continental Europe remains subdued. Against this backdrop, a growing number of debt funds are leaning on bank-provided back leverage to scale their operations, a trend reshaping the competitive and collaborative dynamics between alternative lenders and traditional banks.

Bayes Business School’s latest European CRE lending report, authored by senior research fellow Dr Nicole Lux, highlights stark contrasts in market momentum. UK property values and deal activity have rebounded faster, aided by greater price discovery and transparency. In Europe, by contrast, a mix of stalled development sales, rising capital costs under Basel III guidelines, and stricter environmental upgrade requirements is holding back volumes.

For alternative lenders, this uneven landscape has made cost-efficient funding critical. “Pure equity raising hasn’t been easy for debt funds recently,” says Lux. “Back leverage from banks provides extra capacity to lend, particularly for large, well-established managers with proven track records.”

Aparna Sehgal, chair of the UK & European structured finance and real estate finance practice at Winston & Strawn, describes the shift as less a battle for market share and more a pragmatic partnership. 

“I see the debt funds and the banks working collaboratively,” she notes. “Back leverage lets banks maintain exposure to CRE while optimising capital treatment, and it gives debt funds cheaper liquidity. When it works, it’s a virtuous cycle – more competitive pricing, more capital, more transactions, and more price discovery.”

That collaboration is most advanced in the UK, where non-bank lenders hold about 40% of the CRE debt market, mirroring US levels. In France, Germany, Spain and the Netherlands, penetration is still between 5% and 15%, constrained by entrenched bank dominance and the strength of covered bond funding. 

Back leverage is helping debt funds win higher-leverage mandates in these markets, but smaller-ticket continental deals – often €20–60 million – remain less attractive for large fund platforms.

The interplay between banks and funds could become even more important as Europe approaches a wall-of-debt maturities between 2025 and 2027.

While some loans will refinance smoothly, others may spill into non-performing loan (NPL) sales or structured workouts. 

Large managers have already positioned themselves through strategic stakes in distressed REITs, reducing the volume of trophy NPL pools likely to come to open market.

The legal structuring of back-leveraged financings has also evolved. 

Sehgal highlights a surge in ‘day-one’ loan-on-loan structures pre-arranged at closing, allowing funds to write larger cheques from the outset.

The key, she says, is aligning risk appetite, collateral quality and regulatory constraints across the bank–fund interface. “Pricing is part of the equation, but trust and track record matter just as much,” she adds.

With transaction volumes still below pre-2022 levels, both Lux and Sehgal urge cautious optimism. “We’re all in the starting blocks,” says Sehgal. “The laces are tied, the track is in sight. The question is when the starting gun goes off.”

Marta Canini

Capital Relief Trades

Inaugural Swedish synthetic securitisation

SRT market update

Marginalen Bank has closed its inaugural synthetic securitisation (Project Apple). The transaction references an initial portfolio of SEK3.15bn of Swedish unsecured consumer loans. Marginalen Bank executed the deal with institutional investor Magnetar.

Through this SRT, Marginalen Bank expects to reduce its risk-weighted assets by approximately SEK2bn, strengthening its capital ratios and supporting further growth in its core business.

Revel Partners arranged the transaction on behalf of Marginalen Bank.

Marginalen Bank already came to market last year with Project Argo, a SEK1bn risk-transfer true sale securitisation referencing a portfolio of non-performing consumer loans. 

Vincent Nadeau

Capital Relief Trades

Green asset finance SRT (UPDATED)

SRT market update

The British Business Bank (BBB) is reportedly set to announce a green asset finance SRT next week. Market sources suggest that the BBB is also working with HSBC on a separate transaction. Both are to be executed through the BBB's ENABLE Guarantee scheme. 

Dina Zelaya

ABS

Risk in data centre securitisation

Fitch assesses asset quality according to a range of factors

Re-contracting risk in data centre securitisation, which occurs when an initial tenancy is shorter than the life of the ABS, represents a significant issue for landlords but can be mitigated in several ways, according to Roelof Steenekamp, md in global Infrastructure and project finance at Fitch Ratings.

A shortage of current and potential new space in competing data centres will help the data centre landlord, as will less available alternate capacity in older or smaller facilities that could be repurposed. Barriers to entry of such as supplies of water, power and land would also need to be considered.

These constraints are “becoming increasingly relevant both in larger and developing locations,” he said. The ability of the data centre to meet density, current power and cooling needs will also be taken into account, and in this respect the age and efficiency of the facility will be assessed.

Steenekamp was speaking on a Fitch webinar, titled “Fitch's approach to data centers (Americas/EMEA)”, broadcast yesterday (August 12).\

A key consideration is also the price of the lease relative to the current market price as this affects the ability to replace it. Finally, the type of data centre is “absolutely key”. Can it be repurposed from, say cloud, to AI or inferencing if required? Fitch believes that larger facilities which offer the widest range of possible uses to future tenants, and are in areas where demand is robust, are the best insulated against re-contracting risk.

The independence of the lease from the issuer of the ABS is brought under the spotlight by Fitch, such as the ability to replace the manager, the allocation of obligations under the terms of the lease and the sponsor’s financial reserves.

Obsolescence risk is also a significant issue for data centres. This is the risk that the data centre will no longer be fit for purpose and supply the needs required. This can be offset by appropriate capital investment and is unlikely to be an issue in periods of high demand as replacement options are unpalatable, but over the longer term it has the potential to affect tenant retention and ability to release the space.

Refinancing risk is more of a problem for CMBS-type data centre financing rather than ABS deals and “represents a material risk factor” especially when there is no amortization component, says Eric Rothfeld, an md in CMBS NA analytical group. Given the magnitude of this risk, a long-term tenancy “becomes critical” to Fitch when it assesses creditworthiness.

An ARD (Anticipated Repayment Date) structure, which is more common in ABS deals, provides a little more flexibility for the sponsor as failure to refinance does not constitute a default.

Simon Boughey

ABS

Internationalisation of music ABS gains momentum

First securitisation with European sponsor closed

London-headquartered Recognition Music (formerly Hipgnosis Song Management) last week closed via Barclays the first rated music royalty ABS originated by a European sponsor. The US$372m Lyra MUSIC Assets (Delaware) series 2025-1 marks a significant step forward in the internationalisation of the asset class and growing European engagement in music IP securitisation.

The transaction is backed by a catalogue of more than 47,000 songs - including by artists such as the Red Hot Chili Peppers, Shakira and Justin Bieber - with an appraised value of US$2.95bn by Virtu Global Advisors. The portfolio is diversified by song, catalogue, genre, vintage and revenue stream, with the top 10 songs accounting for just 10.8% of revenues and over three-quarters of the pool being more than 10 years old.

Genres are split between pop (accounting for 45.2% of the collateral), rock (32.5%) and R&B (7.7%). Streaming represents 58.2% of revenue and remains the fastest-growing segment, supported by licensing agreements from platforms such as Meta and TikTok.

Lyra 2025-1 features a 62.5% LTV, a 1.74x DSCR and a six-month debt service reserve. The class A2 notes were rated single-A by Fitch, KBRA and S&P.

S&P director Christine Dalton points to positive sentiment around the deal, given that the sector is expected to grow as more capital becomes available. Whether that demand originates in Europe or the US depends on where the music catalogues themselves are located, as most have historically been located in the US.

Lyra 2025-1 itself was structured and rated in the US and whether a European-domiciled music securitisation will emerge in the future is up for speculation. However, S&P sees no major legal or structural hurdles.

Dalton notes: “The cornerstone of this asset class is really the copyright law, and we believe the copyright laws are similar in Europe as in the US.”

While Lyra 2025-1 isn’t viewed as structurally innovative relative to larger US music securitisations like Concord, S&P md Jie Liang notes that the asset class is still relatively new and is still evolving. She points out that while music ABS first appeared in the late 1990s with the ‘Bowie Bonds’, the current wave of issuance only began in 2021. Public European issuance may follow gradually, as catalogues are aggregated and investor familiarity deepens.

Matthew Manders

Asset-Backed Finance

Vehis Finanse completes Poland's first warehouse-to-public securitisation

Leasing firm raises PLN1.35bn in landmark deal that could open doors for other mid-sized companies

Vehis Finanse last month completed Poland's first-ever warehouse-to-public securitisation, raising PLN1.35bn and transforming an existing auto lease portfolio into a public structure. The transaction, advised by DLA Piper and backed by EIB/EIF and Banco Santander, was executed through an Irish SPV dubbed Vehis Auto Leasing 2025. 

"This is a quite unique deal, not only in Poland but also across Europe," celebrates Paweł Turek, counsel at DLA Piper who led on the transaction. "There are not many examples where a company can achieve such development in such quite short periods of time." 

The deal's complexity required what Turek described as managing 'two transactions simultaneously' - transferring the existing portfolio, which SCI previously reported on, from one SPV to another whilst establishing the new public structure.  

Bartosz Matusik, tax partner at DLA Piper, describes the completion of the public deal as a natural evolution for the portfolio. "The first financing was very successful. After reaching certain level of volume, the decision to do this kind of standard securitisation public deal came as a progression," he says. 

With the new structure, however, new challenges also arose. The number of parties involved in the deal was one of the new challenges that doubled the transaction's complexity, as Turek explains.  

"The number of parties have also doubled. From this perspective, it was quite challenging because we had to manage various issues and various topics and various expectations," he says. 

From a tax perspective, transferring the portfolio also required extra analysis not typically needed in standard securitisations. “It required another piece of tax analysis which is absent in other deals," explains Matusik, noting that Poland lacks comprehensive securitisation regulations, making tax rulings a crucial step. 

The transaction includes commitments to direct at least 30% of new financing to women-led businesses and 10% to electric vehicle leasing. 

Turek says these commitments reflect both EIB/EIF requirements and evolving market trends. Matusik adds that they also respond to growing demand: "The environment is changing in a sense that clients on the market pay attention also to whether women-led businesses are supported." 

Polish securitisation outlook 

The deal's success also reflects Poland's economic strength, according to Turek, who described it as "strong evidence that in the Polish market, the economy is quite robust." He notes that Poland's leasing market is experiencing double-digit annual growth. 

While securitisation is becoming more popular in Poland, Matusik acknowledged the market remains "a little behind other developed countries." However, he hopes that the transaction will encourage the securitisation market to grow. “It might be an example for other firms that are motivated and have ambition to grow fast, that securitisation is the right tool to achieve their goals," he says. 

For Turek, the significance of securitisation for mid-sized companies in Poland is clear. "It allows smaller entities which do not have access to the capital markets and do not belong to any international financial groups to obtain financing from it.” 

Marina Torres 

Asset-Backed Finance

Finland's ABF scene heats up

Regulatory clarity and Eurozone ties boost Finnish private credit as esoteric assets slowly become 'staple piece' in a still-nascent market

Finland's ABF market is experiencing growth as traditional banks step away from smaller deals, opening the door for private credit funds to capture market share – and for esoteric asset classes to elbow into the country's evolving structured finance landscape. 

“Many Finnish SMEs are struggling to get bank financing at the moment due to tightened capital and KYC requirements and banks' preference for larger corporate clients,” says Maria Lehtimäki, partner at Waselius.  

This retreat, however, is creating opportunities for alternative lenders to step in, as Miikka Häyrinen, director at Nordic Trustee Finland, states: "We expect banks to continue stepping back from smaller or higher-risk deals, in line with the trend across the wider Nordics, which could create more room for credit funds to step in.” 

The shift also reflects broader European trends. "Lending is shifting from banks' balance sheets to private credit funds, and in recent quarters, we have seen an increase in Nordic transactions in the plain vanilla direct lending sector," notes Ville Toivakainen, investment director, private assets at Evli.  

Yet, investor appetite for esoteric assets remains untapped for many players. While some legal practitioners report a steady demand, other market participants paint a more cautious picture, reflecting the early-stage development of the market.  

"We are not currently active in the esoteric ABS market in Finland. Investor appetite appears limited. Esoteric securitisations seem to be very much a niche segment in the Finnish market,” explains Häyrinen.  

For Lehtimäki, on the other hand, esoteric deals are slowly becoming “a staple piece" of the market with one or two deals worked on annually. 

Other consensus on Finland's private credit market shared by participants is that it is attracting increasing international attention, particularly in M&A and infrastructure financing. "We know there are several new European players looking to enter the Finnish private credit market as part of their broader European strategy," explains Häyrinen.  

The international interest comes as Finnish institutional investors themselves have been "at the forefront of private credit investing," says Toivakainen. 

"The expected income distribution and total return for private credit remain compelling, even if base rates have decreased," notes Toivakainen, adding that many investors have "recognised the benefits of significant income distributions from private credit." 

Among the reasons that might give Finland an advantage over its neighbouring countries is its Eurozone membership and the Finnish regulator's close ties with EU regulators, as Lehtimäki explains.  

"Finland is probably the jurisdiction where securitisation has been easier to do because we are in the Eurozone," says Lehtimäki, after having observed the market's revival since the financial crisis. 

To her, a clearer regulatory environment has enabled Finnish originators to explore increasingly creative asset classes. Recent examples of innovative transactions in the market included work benefit bicycle leases worth up to €200m. 

"We do basically anything that you can securitise in the Finnish market and there are really no restrictions," notes Lehtimäki. "The only constraints are commercial ones." 

Lehtimäki believes that Finland’s regulatory framework stands in contrast to neighbouring Sweden, where 'gold plated rules' make public deals hard to be launched. Norway only recently re-entered the securitisation space after repealing its own framework and Danish deals are not largely reported on, she explains.

For now, one of the biggest hurdles is the limited number of players, a factor that’s holding back the Finnish market’s ability to scale and compete with international giants. "The market has still relatively few local players,” says Häyrinen. "Bank dominance will most likely remain for the foreseeable future."  

The esoteric ABS segment is part of this potential-versus-reality tension. While different asset classes demonstrate Finnish originators' creativity, investor appetite remains patchy, and many transactions stay private.  

Infrastructure and defence investments, while popular topics, also face supply constraints that may push "pricing into less attractive territory," says Toivakainen, advocating for diversification over momentum chasing. 

Still, an anticipated decline in interest rates should provide a tailwind for ABF activity in the country, while regulatory stability remains a strong plus. The picture that emerges is of a market in transition; small, but ripe with "a lot of potential to develop," as Lehtimäki puts it. 

Marina Torres 

Asset-Backed Finance

Pantheon taps ABF amid record growth in credit secondaries

Continuation funds, ABF portfolios gain momentum as liquidity crunch bites in private credit

As evergreen structures continue to proliferate across private credit, another trend is accelerating: secondary sales and continuation vehicles. These tools have become the go-to for managers racing to unlock capital trapped in portfolios stuck in exit gridlock. Pantheon, a leading global private markets investor and credit secondaries manager, is betting big on asset-backed finance (ABF) to capitalise on the momentum.

“When you have healthy assets bumping up against term limits, it’s imperative for the GP to address client needs,” explains Rakesh Jain, partner and global head of private credit at Pantheon. “Some LPs want capital back now to redeploy elsewhere. Others are happy to extend. Continuation vehicles let you do both.”

Since launching the world’s first dedicated credit secondary fund in 2018, initially backed by German insurers, Pantheon has raised over US$12.5bn from over 200 investors across 30-plus investment vehicles, and invested capital with over 100 GPs and across nearly 5,000 companies.

Deal flow has ballooned from about US$5.5bn in 2018 to US$36bn last year. In 2025, Jain expects a third more activity, with potential transactions tracking US$45bn-US$50bn and US$3.5bn already committed through July.

Jain highlights that one growing source of deal flow comes from ABF – spanning receivables finance, transportation loans, real estate credit, and royalties in music and film, to name a few.

ABF portfolios are increasingly part of the mix as managers under pressure to return capital turn to specialist buyers like Pantheon or roll their holdings into new vehicles for existing investors.

Meanwhile, an increasing number of ABF portfolios are also ending up in evergreen funds - particularly investment-grade assets, such as auto loans and credit cards. Even niche collateral, such as AI chip financing, is starting to surface, though expertise remains scarce and talent gaps continue to be a challenge.

“The primary market has increased significantly,” explains Jain. “Investors want to reallocate and rebalance - something they couldn’t really do before until folks like us came along.”

Kevin Cassidy, investment management partner at Seward & Kissel, confirms this dynamic. “We’ve been helping clients with secondary transactions or funds focused on acquiring secondary stakes in portfolios that are struggling to exit,” he says.

Cassidy mentions Coller Capital’s recent US$6.8bn raise for its second credit-focused secondary fund as proof of demand, but clarifies that continuation tools - while flexible - shouldn’t be the default plan. “If you’re starting a fund today, a continuation vehicle shouldn’t be your endgame; it usually means you’ve hit the end of your fund life and can’t return capital.”

Credit secondaries poised for record growth

According to Jefferies Private Capital Advisory’s recent report, the credit secondaries market is surging at an unprecedented pace and is poised to become the fastest-growing segment within secondaries over the coming years.

Transaction volumes are projected to jump from US$6bn in 2023 to over US$17bn in 2025 – reflecting a CAGR above 70%. The market is shifting from LP-led sales toward GP-led transactions – including continuation vehicles, which are expected to comprise more than 70% of 2025 volumes.

Jefferies points to a perfect storm of tailwinds behind this growth: increasing LP demand for liquidity amid sluggish traditional exits; a surge of dedicated capital from secondary funds, insurers and sovereign wealth funds attracted by attractive pricing; wide adoption of continuation vehicles by blue-chip credit managers; and fundraising challenges prompting GPs to unlock dry powder and provide liquidity options.

All these factors, amid tighter bank lending and evolving regulations, are feeding Pantheon’s pipeline.

Jain explains that being a non-competing capital partner, without a direct credit origination business, helps secure deals many GPs would never show to rival lenders. “There will be more competition,” he says. “But we’ve been doing this a long time, have the largest team, scaled capital and the most GP relationships. That’s hard to replicate.”

While some continuation vehicles may still be born of necessity, Jain notes that they’re increasingly a sign of sophistication. “It’s becoming much better understood,” he says. “It can even help GPs attract new capital.”

Pantheon is also eyeing more esoteric ABF opportunities, including a music royalty-backed secondary deal reportedly underway, which SCI will be tracking closely.

Marta Canini

Capital Relief Trades

Man Group seeks diversification over asset class bets in SRT playbook

Man Group highlights diversification, discipline and durability

Man Group foresees an exciting course in the European SRT landscape, as supply-demand dynamics stabilise and emerging issuer geographies broaden investor participation.  

Matthew Moniot, co-head of credit risk sharing at Man Group, tells SCI that the firm explores new synthetic securitisation opportunities, while staying focused on quality, structure, and long-term relationships as the market enters a promising new phase. 

“Money was able to move into the market faster than banks were able to manufacture deals,” Moniot explains, reflecting on 2024’s intense demand surge.  

Now, as supply begins to align with demand, Man Group plans to prioritise structural resilience and capital protection over chasing perceived safe havens.  

“We don't target specific asset classes. Rather, we focus on assembling a diversified portfolio with tight exposure limits,” Moniot says. 

“What we consider attractive are assets that are core to our counterparty’s business. Since we cannot predict the future, we focus on assembling diversified exposures rather than trying to anticipate which asset classes will outperform.” 

The investor’s diversified approach spans nearly every asset class, ranging from SMEs and project finance to trade receivables and CRE opportunities. Moniot warns, however, that asset labels alone could be misleading and that pricing must always reflect the real risk.  

“There is no ‘risk-free’ asset. We evaluate every deal through a lens of price, volatility, issuer discipline, and structural mitigants,” he points out.   

Man Group oversees a total of US$193.3bn in AUM, with its credit platform accounting for US$42.7bn, as of 30 June 30 2025. Moniot and his team view synthetic securitisation as a streamlined and efficient tool, well aligned with their investment philosophy. 

“Synthetic securitisation is simple, clean and efficient, and these are really the hallmarks of all good structures, in our view,” he explains. 

“When you compare synthetics to traditional cash securitisation or true sale structures, synthetics can offer compelling value through their streamlined execution and reduced complexity – though this advantage doesn't necessarily apply across every underlying asset class.” 

New geographic horizons  

While the firm’s SRT appetite is mainly driven by portfolio diversification and good partnership, attractive jurisdictions across Europe and Asia are currently on its radar. 

“We do not proactively move toward specific areas in the market. Instead, we seek to maximise our diversification, provided we understand the assets and we think the issuer is a strong underwriter and servicer," comments Moniot. "That said, we do expect there will be increased issuance in Scandinavia, Central and Eastern Europe, and Asia going forward," he adds. He believes that the growing number of jurisdictions reflects healthy market development, which could in turn prompt new regions across Asia and Latin America to soon step onto the synthetic securitisation scene.   

Regulatory friction & deal structuring  

For many market participants, inefficiencies such as capital non-neutrality and SECREG-related hurdles remain part of the structuring landscape. Over time, the SRT market has adapted to both highly permissive and highly constrained environments, experienced players are confident they can navigate almost any regulatory setting. 

The regulatory evolution is therefore seen by investors as less of an existential threat and more as an ongoing variable to keep an eye on. Similarly, Moniot shares that resilience in the market does not depend on uniform conditions, but rather on flexible, rigorous structuring. For him, the solution lies in applying rational, coherent rules that acknowledge the market’s growing diversity and sophistication. With nearly 30 years in the industry, he remains optimistic about SRT trades as he concludes: “The consistent growth of this market has been nothing short of extraordinary. And there is no obvious reason for that to change”. 

Nadezhda Bratanova

Capital Relief Trades

Another auto deal for US regional

Huntington revisits the CLN market

Huntington Bank, headquartered in Columbus, Ohio, priced its expected credit-linked note (CLN) referencing prime auto loans this week, say market sources.

Total deal size was US$414m, and the largest tranche, designated B1, was a US$315m fixed rate note priced to yield 4.883% or 120bp over the interpolated curve, rated A3.

The US$30m B2, also rated A3, is a FRN priced at 120bp over SOFR. The Ba3-rated US$15.75m C tranche comes in at SOFR plus 135bp, while the US$29.75m B3-rated D tranche yields SOFR plus 325bp.

Finally, an unrated US$19.25m E tranche yields 660bp over SOFR.

All maturities are between two years and 2.8 years.

The trade was designated HACLN 2025-02, following another auto-linked CLN priced in March.

This followed its debut in the synthetic securitisation market in June 2024. It followed this with a deal in November last year.

All four forays into the CRT space by Huntington have been to reference auto loan exposure. As has been noted, this asset is appealing as a synthetic reference for many US regional banks.

Simon Boughey

SRTx

Latest SRTx fixings released

(Spread) momentum continues

Uncertainty remains the dominant theme for 2025 to date, primarily driven by the US administration’s evolving approach to tariffs, shifting policy deadlines and geopolitical tensions. Consequently, the current volatile macro-political and economic environment continues to call for a cautious stance, namely a struggle between the inflationary pressures resulting from trade frictions, and the knock to economic growth that such frictions may cause.

Within this context, the latest SRTx spread indexes however clearly point to a flattening in spreads. After a brief widening in April and Liberation Day, spreads have returned to levels comparable to the end of last year, only marginally wider.

As the second half of the year gets further on its way, market  sources and financial reports are pointing to several warning signs of a potential transition from late expansion to an early downturn in the credit cycle. Yet, predictions for the SRT market include significant issuance volume, combined with a decline in aggressive new investors, likely exerting downward pressure on spreads.

With a reported significant 50% year-on-year growth in H1, market commentators now suggest that (for large European banks) the main driver for issuance is market forces, as opposed to the longstanding narrative of regulatory-driven balance sheet optimisation. Expanding on this view, one source notes:

"In my view, the driving force behind SRT transactions in Europe is not regulatory mandates, but rather market forces. While regulation certainly enables these transactions, one true catalyst is the intense scrutiny from equity analysts during earnings calls. They are consistently questioning bank management on their approach to capital and balance sheet management. The banks that demonstrate a serious commitment to these practices are being rewarded with higher stock prices, indicating that market expectations—not directives from the ECB or the Bank of England—are the primary motivator."

As alluded to in the introduction, the latest SRTx spread indexes have tightened across the board and retraced back to Q42024 levels (Large corporate: EU -3.0%, US -9.4%; SME: EU -10.3%, US -16.7%).

The SRTx Spread Indexes now stand at 806, 581, 813 and 1,000 for the SRTx CORP EU, SRTx CORP US, SRTx SME EU and SRTx SME US categories respectively, as of the 31 July valuation date.

Regarding volatility, the sentiment suggests - unsurprisingly in times of dislocation - that volatility is going to worsen over the next couple of months (Large corporate: EU +16.7%, US +25.0%; SME: EU +16.7%, US +50.%). This is in line with broader macro strategies, with performance leaning negative.

The SRTx Volatility Index values now stand at 54, 63, 54 and 75 for the SRTx CORP VOL EU, SRTx CORP VOL US, SRTx SME VOL EU and SRTx SME VOL US indexes respectively.

Similarly, the liquidity sentiment has deteriorated across the board. The deterioration in liquidity sentiment, particularly as the year draws to a close, is perhaps unsurprising, aligning with the classic rationale of declining market liquidity toward year-end. (Large corporate: EU +16.7%, US +14.3%; SME: EU -26.4%, US +33.3%). However, and more importantly, private markets continue to benefit from cyclical tailwinds. 

The SRTx Liquidity Indexes stand at 50, 50, 54 and 67 across SRTx CORP LIQ EU, SRTx CORP LIQ US, SRTx SME LIQ EU and SRTx SME LIQ US respectively.

Finally, the credit risk outlook is increasingly trending up across the four categories (Large corporate: EU +16.7%, US +44.4%; SME: EU +16.7%, US +71.4%). In the US for example, Although initial pandemic savings protected U.S. consumers from restrictive monetary policy, weaknesses have started to appear, particularly among lower-income households. Household debt is on the rise, driven by significant increases in both mortgages and home equity lines of credit. Adding to this pressure, the government has resumed collecting payments on defaulted student loans for the first time since the pandemic. Meanwhile, credit card delinquencies have reached their highest point since 2012. Such indicators point to a worsening in the credit sentiment in the upcoming months. 

The SRTx Credit Risk Indexes now stand at 58 for SRTx CORP RISK EU, 65 for SRTx CORP RISK US, 58 for SRTx SME RISK EU and 75 for SRTx SME RISK US.

SRTx coverage includes large corporate and SME reference pools across the EU and US economic regions. The index suite comprises a quantitative spread index - which is based on survey estimates for a representative transaction (the SRTx Benchmark Deal) that has specified terms for structure and portfolio composition - and three qualitative indexes, which measure market sentiment on pricing volatility, transaction liquidity and credit risk.

Specifically, the SRTx Volatility Indexes gauge market sentiment for the magnitude of fixed-spread pricing volatility over the near term. The index scale is 0-100, with levels above 50 indicating a higher proportion of respondents estimating volatility moving higher.

The SRTx Liquidity Indexes gauge market sentiment for SRT execution conditions in terms of successfully completing a deal in the near term. Again, the index scale is 0-100, with levels above 50 indicating a higher proportion of respondents estimating that liquidity is worsening.

Finally, the SRTx Credit Risk Indexes gauge market sentiment on the direction of fundamental SRT reference pool credit risk over the near term. The index scale is 0-100, with levels above 50 indicating a higher proportion of respondents estimating that credit risk is worsening.

The objective of the index suite is to depict changes in market sentiment, the magnitude of such change and the dispersion of market opinion around volatility, liquidity and credit risk.

The indexes are surveyed on a monthly basis and recalculated on the last trading day of the month. SCI is the index licensor and the calculation agent is Mark Fontanilla & Co.

For further information on SRTx or to register your interest as a contributor to the index, click here. 

Vincent Nadeau

CLOs

CLO volatility misunderstood as credit risk, says CIFC

Huang unpacks the real risks in CLOs, the rise of ETFs and how a niche market is becoming more mainstream

When the Covid-driven market chaos hit in March 2020, many investors saw the sharp price moves in CLO tranches and drew the conclusion that CLOs must be a risky asset class. But that conclusion is both widespread and deeply flawed, according to Jay Huang, head of structured products investments/senior portfolio manager at New York-headquartered CIFC Asset Management.

Speaking to SCI, Huang argues that the volatility seen in CLO debt isn’t about credit risk at all. “It’s about how few people actually trade these securities,” he says. “On any given day, only around 20 to 50 people globally are actively trading CLO debt. So if half of them step back during a crisis, you’ve lost most of your liquidity.”

And that’s exactly what happened during March 2020. CLO prices dropped not because the assets were failing, but because the buyer base evaporated - albeit temporarily, he notes. "That kind of price action says more about the structure of the market than it does about the credit quality of CLOs," Huang adds.

Despite this perception problem, CLOs have shown remarkable performance. Huang points to historical default data that’s rarely shared outside of specialist circles.

“Double-B CLOs have a long-term default rate that’s one-tenth of similarly rated corporate bonds,” he notes. “Yet they offer far more yield. It doesn’t make sense - unless you factor in the thinner investor base and associated volatility.”

He sees it as a misunderstanding of what risk truly means. “Many allocators use volatility as a proxy for credit risk,” Huang says. “But with CLOs, that approach doesn’t hold up. What looks like a risky asset is often just a thinly traded one.”

It’s not just a matter of credit performance either. CLOs are structurally designed to withstand stress.

“These deals are built for imperfection,” he says. “They’re priced assuming some level of default - unlike high yield bonds, which only hit their quoted yield if every issuer pays in full.”

The ETF tipping point

While misconceptions about CLO risk persist, Huang sees the market beginning to shift - especially as CLO ETFs gain traction.

“ETFs are forcing efficiency in the market,” he explains. “The traditional six- to eight-week delay between pricing and settlement in the primary CLO market doesn’t work for vehicles that need daily liquidity.”

That dynamic is already changing trading behaviour. Investors are increasingly willing to pay a premium in secondary markets just for faster liquidity - a reversal of the normal dynamic seen during market stress.

Over time, Huang believes ETFs will reshape CLO investing. “Just like Covid forced us to adapt to remote work faster than we ever planned, ETFs are pushing the CLO market to modernise. It’s making us better - more efficient, more responsive - even if it comes with growing pains.”

Preparing for what comes next

Still, Huang cautions that this shift hasn’t been fully tested. “We haven’t gone through a March 2020-style event with this level of ETF participation,” he notes. “If redemptions spike in a true credit crunch, that could cause short-term dislocations. But just like with Covid, short-term disruption could lead to long-term resilience.”

For now, Huang sees opportunity in the primary CLO market, where spreads remain attractive and structural protections are robust. “Total returns speak for themselves,” he says. “Double-B CLOs have outperformed loans and high yield bonds - often by a factor of three - since 2011.”

The key, according to Huang, is understanding what you’re really buying. “You’re not taking on extra credit risk - you’re stepping into a market that’s still evolving. And in that evolution lies opportunity.”

Ramla Soni

Asset-Backed Finance

Inside Aperture's new billion-dollar ABF strategy

Aperture's new global head of ABF discusses strategy, market timing, and expansion plans with SCI

Aperture Investors has launched a US$1bn asset-backed finance (ABF) strategy led by their newly hired portfolio manager and global head of ABF, Nick Turgeon. Seed capital comes from Generali Investments and is already attracting strong interest from third-party investors. The strategy targets consumer, commercial, and esoteric credit markets starting in North America before expanding to Europe. SCI speaks with Turgeon about the new strategy, market timing, and expansion plans. 

Q: Why did you decide to join Aperture now? What sets the firm apart? 

Nick Turgeon: I was drawn to Aperture’s focus on performance and incentive alignment, as well as their strategic vision for growth. The long-term nature of Generali’s capital, coupled with Aperture’s commitment to expanding its private credit platform, provides a uniquely stable foundation for executing this strategy effectively. That infrastructure allows us to take a multi-year view — building enduring, trusted relationships with non-bank lenders while being a prudent steward of capital for our LPs. 

Aperture offers the institutional resources and operational infrastructure of a global asset manager, combined with the autonomy and entrepreneurial flexibility of a boutique. With a targeted strategy size of around $1 billion, we’re large enough to be a partner that can scale with leading originators, yet small enough to remain highly selective and participate in transactions that often fall below the radar of the largest managers. 

Q: What exactly is the new ABF strategy targeting?  

NT: We primarily focus on the core segments within asset-based finance: consumer, commercial, and select esoteric credit. These are typically diversified pools of individual loans, enabling a more probabilistic, asset-level underwriting approach. 

Our emphasis is on structuring transactions with strong collateral coverage, predictable cash flows, and built-in downside protection. Every deal is underwritten to withstand a GFC-style recession as our stress case. Within that framework, we target sub-asset classes such as personal installment loans, credit cards, auto loans, SME finance, and royalty streams. 

We seek to differentiate through a downside-first, data-driven underwriting process, tailored structuring to meet each originator’s needs, and the flexibility to provide solutions across the capital stack. 

Q: Why launch now? 

NT: We’re launching a strategy to fill a gap in the market by providing scalable, solution-oriented capital to non-bank lenders, while staying intentionally sized to maintain discipline and prioritizing performance over asset aggregation. 

Asset-based finance has become the focal point of the private credit market. Capital is flowing into the space as limited partners look to diversify beyond traditional corporate credit, and as banks continue to pull back, the opportunity set is only growing. 

That market dislocation has created an opening for long-term, flexible capital that can scale with originators and deliver sustainable growth. 

Q: The announcement mentions the United States as the starting point. Why the US, and what's the timeframe for European expansion? 

NT: We’re starting in North America because it’s the deepest and most established ABF market, with strong legal frameworks, diverse originators, and a robust pipeline that fits our downside-first approach. 

Europe is a logical next step, and we expect to expand there within 12–24 months. While Europe is already a very established market, we believe there is a lot of white space for growth. Our first step will be finding a dedicated team in the EU that aligns with our investing approach. 

Marina Torres

Structured Finance

Job swaps weekly: Castlelake launches Merit AirFinance

People moves and key promotions in securitisation

This week’s roundup of securitisation job swaps sees Castlelake naming the leadership team for its new aviation lending business. Elsewhere, Railpen has awarded a securitised credit mandate to Neuberger Berman, while Wells Fargo has named a new head of CMBS large loans. 

Castlelake has launched Merit AirFinance, an aviation lending business that will provide debt capital to airlines and leasing companies for new and used aviation assets. Structured as a separate operating subsidiary, Merit will focus on delivering flexible financing solutions while maintaining separation from Castlelake’s leasing activities. The new platform builds on Castlelake’s deployment of more than US$5bn to airlines and leasing companies since 2020 and will launch with the ability to deploy over US$1.8bn of committed capital via separately managed accounts.

As part of the move, Patrick Mahoney has been appointed president of Merit AirFinance, transitioning from his role as Castlelake’s md, head of aviation, capital markets. Since joining the firm in 2017, he has held roles across Castlelake’s aviation underwriting, asset-based direct lending, and capital markets teams. 

Succeeding Mahoney in his previous role, Jakob Gallagher joins Castlelake as head of aviation, capital markets. Gallagher brings 13 years of aviation capital markets experience, including his role as treasurer and head of capital markets at Wings Capital Partners, where he worked between 2019 and 2023, before founding his financial advisory firm Flight Financial Advisors.

UK pension fund Railpen has awarded a securitised credit mandate to Neuberger Berman, building on an existing strategic partnership between the two firms and providing Railpen with additional exposure to liquid securitised credit. Structured as a Qualifying Investor Alternative Investment Fund (QIAIF) within the Neuberger Berman Investment Funds II umbrella, the mandate includes CLO, ABS, CMBS and RMBS investments. 

The portfolio will be co-managed by Joe Lynch, senior portfolio manager for multisector fixed income; Pim van Schie, senior portfolio manager for structured credit; and Jose Pluto, portfolio manager for securitised products.

Railpen and Neuberger launched a £2bn multi-asset credit strategy in July 2024. The additional allocation to securitised credit will increase this partnership to above £3bn.

Wells Fargo has appointed Steve Caldwell as head of CMBS large loans within its New York-based real estate securitisation & capital markets group. He brings over 20 years of real estate finance experience, having previously worked at Barclays.

Steven Kolyer has joined Cadwalader as partner and co-head of its CRE CLO practice, based in New York. He will co-head the practice with Jeffrey Rotblat, a senior Cadwalader partner and experienced commercial real estate securitisation lawyer.

Kolyer has broad experience in securitisation, structured credit products, fund formation and finance, and both real estate and corporate CLOs. He was previously a partner in Sidley Austin’s global finance department, which he joined in December 2018 from Clifford Chance.

EverBank has hired Christina Bohm as an md in its fund finance group, a division of the bank’s asset-backed finance platform. Based in New York, Bohm will focus on expanding the bank’s capabilities in providing tailored financing solutions to private equity funds and alternative investment managers.

She brings more than a decade of experience in fund finance and structured solutions, having most recently led the structured liquidity solutions practice at PJT Partners. Before that, Bohm was head of sales of the fund financing and solutions business at Nomura.

Charles “Chuck” Callahan has become ceo of DXM, which provides structured risk management solutions geared to the residential mortgage market. The firm has around 10 employees, and its advisory board includes two former Federal Reserve governors as well as the former ceo of Fannie Mae. George Crowley, founder of DXM, moves into a new role as chairman.

Callahan retains a role with Heliostat Capital, but the bulk of his time will now be devoted to DXM. DXM’s target client base is small-to-mid size banks, generally with assets of between US$2bn and US$100bn. It aims to reduce risk and provide balance sheet optimization in resi MBS pools, and Callahan brings a new set of CRT-based solutions to the table.

Private markets platform Titanbay has hired Austin Brady as designated person investment management, based in Dublin. He is tasked with driving asset growth and generating new business opportunities. Brady was previously product lead - credit and research at Waystone, which he joined in January 2024, having been portfolio manager ABS and illiquid public sector fixed income at Dexia Credit Local before that.

Balbec Capital has hired Kenneth Balling as vp in its capital formation group, based in New York. Balling leaves his role as vp in the business development team at Pretium after four years with the business. He previously spent five years at JP Morgan.

And finally, iCapital has appointed Sonali Basak as chief investment strategist. Based in New York, Basak will lead the firm’s investment outlook, thought leadership, and client-facing content, with a focus on educating investors on private credit and other alternative markets. She will report to chairman and ceo Lawrence Calcano. 

Basak joins from Bloomberg Television, where she was the lead Wall Street correspondent, covering public and private markets and major financial institutions.

Corinne Smith, Marta Canini, Simon Boughey, Kenny Wastell