2024 Global ABS Conference: Key Themes

The Freshfields securitisation team recently travelled to Barcelona for the 2024 Global ABS Conference. As well as catching up with clients and colleagues, we were able to share our views on some of the latest market developments, trends and transactions and to hear the same from a range of market participants. We highlight two key themes from the conference in this post.

1.  Private capital investment in asset-backed finance is increasing

Private capital investors are increasing allocations to asset-backed financing investments to deploy capital at scale. Investing in these credit products allows investors to access attractive risk-adjusted returns backed by self-liquidating granular asset portfolios, and to further diversify credit investment activities in addition to leveraged finance and real estate lending. This activity is being positioned as a partnership between investment banks and private credit investors, rather than competition for investments, where banks can add value and provide services to private capital investors by sourcing and arranging investments and by providing senior leverage.

Credit funds have traditionally been active investors in structured finance markets (primarily in non-performing loan portfolio acquisitions, forward flow transactions and mezzanine lending) but we are currently seeing more participants and more capital entering the market. This shift has confirmed there is a significant role for private capital to play in providing funding for non-bank speciality finance products.  Examples include consumer finance products such as mortgages, consumer loans and buy now pay later loans, and funding for more esoteric capital-intensive industries or infrastructure such as solar equipment, electric vehicle leasing or data centres. 

2.  Securitisation is funding expansion of the European non-bank specialist lending market

Banks have traditionally been the main players in the European lending landscape, but since the financial crisis there has been a steady withdrawal in more specialist or esoteric areas of lending due to a combination of regulation and risk appetite. This has created a “liquidity gap” which is being filled by non-bank speciality finance lenders with funding provided under securitisation and forward flow financing structures. This in turn is now playing an important role supporting key industries by providing funding to the real economy.

One theme is securitisation financing the energy transition. This is a capital-intensive industry, and securitisation is becoming a common funding source for companies across Europe which are manufacturing, selling and installing renewable energy assets, equipment and infrastructure such as electric vehicles, solar panels and heat pumps. This supply of capital allows these companies to grow their lending activities without being constrained by balance sheet financing.

Another theme addressed at the conference was the development of new asset classes by these specialist lenders which are being financed via securitisation, in some cases following trends from the US securitisation market. These esoteric assets include art-backed loans, music royalties and sports assets. We have recently seen a number of securitisation warehouse facilities used to finance data centres and we are expecting this to be a significant growth area in the European market.

So overall, another successful Barcelona conference with a positive market outlook and plenty of activity expected to follow. If you would like to discuss any of these topics further, please contact any of our London structured finance team.