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Day 3 of the Global ABS conference held in Barcelona, Spain moved beyond mainstream securitisation, highlighting the rapidly strengthening ties between bank balance sheets and private credit, including asset‑based finance (ABF). Issuers and investors debated how private credit might grow in scale and scope, while industry leaders mapped the next wave of ABF strategies and fund finance innovation. The tone was unmistakably forward‑looking: the next phase of the industry will be shaped by collaboration—not competition—between banks and private lenders.
Credit Where Credit’s Due: The Present & Future of Private Capital & Bank Collaboration
Speakers rejected the narrative that private credit crowds out banks; instead, they framed it as a balance sheet release valve that helps lenders manage risk‑weighted capital. Panellists agreed that transferring risk to private funds enables banks to manage their balance sheets and navigate regulatory constraints without curbing new lending.
Panellists noted that shifting from public ABS to bilateral distribution to ABF funds offers the promise of steadier, more predictable execution, making balance sheet planning easier. Recent volatility showcased the contrast—private markets proved resilient, while term securitisation windows snapped shut.
“Co‑Op’etition”: Private Credit & Bank Partnerships
Partnerships between banks and credit funds are already moving from ad hoc transactions to formalised frameworks. Banks retain their edge in origination and servicing, while funds soak up capital‑intensive exposures—an elegant split where banks can focus on investment-grade (IG) quality flow while credit funds harvest illiquidity premiums.
Panellists pointed to technology as a potential wild card, as digital platforms could unbundle origination economics, forcing banks to evolve or lose share. Panellists expect private credit to maintain its strong growth trajectory, while noting that transparency lags public markets and further regulatory scrutiny is likely.
To Infinity & Beyond: ABF Industry Leaders
ABF was cast as the “younger sibling” of private credit—early stage, highly scalable, and offering contractual, collateralised cash flows across both traditional and esoteric assets. Growth will hinge on three engines: the rise of suitable collateral (panellists pointed to examples ranging from music royalties to inventory), structural innovation that tailors risk to investor appetite, and Basel‑driven pressure on banks’ risk-weighted assets (RWA).
While the US remains the deepest pool, Europe’s capital needs—energy transition, defence, and infrastructure—make it ripe for growth despite market and regulatory fragmentation. Key risks include policy volatility and data challenges; nonetheless, panellists argued that Europe could become the breakout ABF market of the next decade.
Navigating Private Credit: Fund Finance & NAV Lending
Fund finance has morphed into a USD1 trillion ecosystem anchored around two pillars: short‑term subscription lines secured on limited partner (LP) commitments and net asset value (NAV) loans backed by funds’ investment assets. Fund finance has developed to now support funds’ capital deployment and portfolio management, as well as LP and general partner liquidity.
Convergence with securitisation is accelerating—subscription line securitisations and feeder fund rated notes use credit tranching, payment waterfalls, and other securitisation technology, opening the underlying assets to insurance capital. NAV loans backed by realisations from private equity investments require nuanced analysis, although conservative loan-to-value (LTV) ratios and rights to challenge valuations can mitigate risks.
Regulatory scrutiny of bank-fund interconnectedness is expected to persist. Panellists predict that key fund finance products will become increasingly standardised and transparent, potentially achieving mainstream status alongside term ABS—offering a flexible, scalable solution for global capital deployment.