Ahead of her panel appearance at FT Live Fixed Income Events' Global ABS in Barcelona next month, Sara McGinty, partner at Ares Alternative Credit, shares her insights on the evolution of the SRT market. McGinty tells SCI where she sees the greatest potential for growth and innovation, how macro and regulatory shifts are shaping issuer behaviour, and what is needed to take the US market to the next stage.

 Q: The Global ABS Conference is just around the corner – which SRT topics or panels are you most looking forward to?  

 A: We are always interested in asset classes experiencing significant growth, such as digital infrastructure and fund finance. We are also very focused on the geopolitical environment and the effects of tariffs and/or a potential recession on the global consumer.  

 Q: The SRT space continues to experience notable momentum this year. Which jurisdictions do you expect to gain more prominence in the coming months and what is driving that growth?  

 A: Given that the launch of SRTs in the US is still in its early stages, we expect this will continue to be an area of growth – despite the outlook for lower rates or potential regulatory easing under the new administration.  

 Q: How are current macroeconomic conditions – including interest rates and credit cycle concerns – shaping SRT issuance trends?  

 A: While the current macro and regulatory environment might dampen the overall capital needs for SRT issuance in the US, banks still want to set up these programs to use SRTs as one of the tools in their balance sheet management. SRTs can take different forms and address various needs – such as balance sheet expansion, hedging, and capital relief. In fact, economic uncertainty may encourage banks to use all forms of capital relief and partner with private capital to grow or maintain their lending to key clients as volatility continues.  

 Q: Within the SRT landscape, where do you anticipate the most significant growth or innovation in the next 12–18 months?  

 A: The SRT technology itself is the innovation – and it’s here to stay in the US. We expect to see more banks using SRTs, as many of the larger institutions are still working on their first transaction. From there, growth will come as banks expand the use of this technology across different asset classes on their balance sheets.  

Q: How is the Basel III Endgame framework influencing issuer behaviour today?  

A: It remains unclear what the final Basel III Endgame will look like. The consensus seems to be that regulation will be less restrictive than originally anticipated. However, we still believe the US will be a growth market for SRTs, as banks are just beginning to use this technology to optimize their balance sheets. While the pace may be slower than initially expected, the direction of travel is still forward. Banks continue to use SRTs to manage parts of their balance sheets with high risk-weighted assets – particularly in portfolios tied to lending in growth areas like private credit – and need to keep up with that pace of expansion.  

 While early US SRT transactions were primarily driven by acute capital and liquidity pressures, banks are now recognizing the broader value of the technology and the increase in private capital available to support it. More recently, we’ve seen banks using SRTs to expand market activity in sectors where they see opportunity – partnering with firms like Ares to grow market share while managing balance sheet exposures. Much like securitization, SRTs offer long-term strategic benefits to banks, and we believe they’re here to stay. The partnerships being established today between banks and private capital are likely to lead to more activity – not less – in the future.  

 Q: Are there any asset classes you think are underexplored or ripe for growth?  

 A: Digital infrastructure, BDC revolvers, and fund finance.  

 Q: How do you view the evolution of investor appetite in the SRT space, particularly as more LPs and private credit managers enter the market?  

 A: Investor appetite has come in waves – particularly in the US, where the SRT market is only about two years old. It’s not surprising to see such a sharp rise in interest for a relatively new market, especially in areas offering attractive risk-adjusted returns. When the market first opened in 2023, asset classes like prime auto, capital calls, and investment-grade corporates looked compelling. At that stage, the process was targeted at larger, experienced asset managers, where execution certainty and strategic partnership were critical.  

 As the market has matured, and more entrants and dedicated capital have come in, our appetite has shifted toward larger transactions in high-quality asset classes where we see relative value compared to the broader opportunity set. If that doesn’t exist, we pivot to non-SRT investments. That said, a lot of capital has been raised specifically for SRT strategies – and it needs to be deployed – so broader investor appetite is likely here to stay for some time.  

 Q: As an active participant in this space, what would you like to see more of – across issuers, investors, or even regulators – to help the market mature further?  

A: More guidance from regulators to the banks is always helpful in developing a market. Regulatory clarity gives banks a level of certainty that should encourage higher levels of issuance from here. 

Nadezhda Bratanova