Asset-Based Finance Funds Are In Vogue
While similar securitization technology may be used for both public asset-backed securities (ABS) and private asset-based finance (ABF) transactions, the latter generally have more bespoke collateral pools and may benefit from enhanced structural protections.
There is growing interest in obtaining credit ratings for investment vehicles financing pools of ABF transactions, significant risk transfers (SRT), and fund finance facilities. Since the risk profile of individual transactions can vary widely across these exposure types, the investment vehicle's structural features and the manager's flexibility can influence our analysis.
Key differentiators of credit risk across investment vehicles include the creditor class subordination structure and security package, refinancing risk in the capital structure, and documented structural protections, such as interest and principal coverage or portfolio investment tests.
Previously, it mostly comprised corporate exposures through direct lending. Now it also includes securitization exposures, fund finance exposures, and real asset exposures.
Source: S&P Global Ratings.
