The latest trends from the speciality finance space
Speciality finance is continuing to gain momentum in private credit. Allocators are increasingly turning their attention to asset-based lending strategies, with royalties being a key area of interest, while banks are taking note of private credit’s developments around significant risk transfers. In this special report, we explore how managers and investors alike are accessing opportunities in this space.
INSIDE THE REPORT
Why royalties are such a hit with credit investors
Institutional investors are increasingly flocking to royalties strategies as predictable cashflows top investment agendas.
Spotlight on SRTs: From niche to notable
Significant risk transfers are growing in popularity on both sides of the Atlantic as banks recognise their value in improving returns on capital – though more standardisation would be welcomed.
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InterVest capital partners on data and discipline to ABF investing
Steven Tenenbayev, chief investment officer at InterVest capital partners, explains what is required to capitalise on asset-based finance’s continued growth.
Speciality lending is on a hot streak
The asset class continues to gain momentum among institutional investors, giving smaller managers in niche areas a chance to show off their credentials.
PREVIOUS COVERAGE
Investors are increasingly drawn to speciality finance strategies – particularly those that are well insulated from macroeconomic shocks and help LPs to diversify their portfolios into strategies linked to cashflow. Asset-backed finance and royalties have become two major talking points across the private credit industry, as we explore in this special report. We also look at what the future might hold for niche strategies such as private margin loans.
We shine a spotlight on five of the hottest areas, with asset-based lending and consumer lending dominating the space, and smaller niches such as litigation finance, royalties and trade finance increasingly capturing investor attention. Plus: opportunities for emerging managers, and what the default disconnect means for investors.
Five key trends in speciality finance: Asset-based lending
Lending secured by assets on a company’s balance sheet is a growing form of finance.
Five key trends in speciality finance: Litigation finance
Legal assets offer attractive uncorrelated returns.
Five key trends in speciality finance: Royalties
Royalty strategies exploit borrower demand.
Five key trends in speciality finance: Consumer debt
Contrary to what some might think, managers argue now is a great time to move into consumer lending.
Five key trends in speciality finance: Trade finance
Integrated supply chains are transforming an area previously ignored by debt funds.
KKR: Why asset-based finance is gaining more attention
Asset-based finance can be strongly complementary to direct lending, says Dan Pietrzak, partner and global head of private credit at KKR.
LPs wake up to speciality finance opportunity
Investors prefer more targeted strategies to mainstream mid-market direct lending.
InterVest: The benefits of taking a flexible approach
Market dislocation is bringing new opportunities across the capital stack, says Michael Gontar, chief executive at InterVest capital partners.
Schroders: Finding the sweet spot in speciality finance
Low risk premiums and high yields require a shifting opportunity set, says Michelle Russell-Dowe, co-head of private debt and credit alternatives at Schroders Capital.
Emerging managers prove their worth in speciality finance
This is a rare part of the market where first-time funds have a chance to stand out.
Brevet: Improving public policy with private credit
Serving as the bridge between small to medium-sized businesses and government programmes is a rewarding process that can stimulate innovation, say Brevet Capital’s Douglas Monticciolo and Mei-Li da Silva Vint.
Why fund managers are embracing more unconventional forms of finance
Leading fund managers and investors discuss five key trends driving private debt’s most esoteric array of alternative investments.
Distressed debt: The default disconnect
For the first time, there are signs that distressed debt levels may be disconnected from default activity – but what does this mean for investors?
LCM Partners on asset-backed lending: A heterogeneous asset class
Given the diverse nature of the asset class, and the number of new asset-backed lending strategies coming to market, the importance of manager selection should not be underestimated, says Paul Burdell, co-founder and CEO at LCM Partners.
Monroe Capital: Speciality finance a strategy for multiple rate environments
Monroe Capital’s Aaron Peck and Kyle Asher discuss why speciality finance is a good option for private credit exposure that can deliver exceptional, uncorrelated risk-adjusted returns.
Goldman Sachs AM on the tailwinds behind asset-based finance
One attraction is that assets offer a diversification play relative to other fixed income exposures, says Goldman Sachs Asset Management’s Kevin Sterling.
Northleaf: The advantages of niche asset-based speciality finance
Attractive return profiles and strong lender protections with limited loss rates are key benefits of ABSF, says David Ross, managing director and head of private credit at Northleaf Capital Partners.
Magnetar: How speciality finance drives the economy
Diverse opportunities and economic insulation characterise the speciality finance opportunity, say Magnetar’s David Snyderman and Erik Falk.
As capital floods into private debt, managers are examining previously overlooked areas of speciality finance to carve out new niches. We see how tech is creating fresh ways for funds to interact with consumers, and examine a potential resurgence in NPL opportunities. Plus: has credit secondaries been overlooked by the SEC? Also included: the benefits of low correlation; lesser known residential focuses; and the importance of flexibility.
Consumer lending’s broad reach
How is technology creating fresh ways for private debt funds to interact with consumers?
FC Capital on why knowing the servicer is key
The expertise and financial solidity of the servicer is something people often overlook in speciality finance. Christian Brehm of FC Capital explains why this would be a mistake.
Regional bank crisis brings opportunity for NPL investors
We could be moving into a new cycle for non-performing loans, just as the last one appears close to being resolved.
LCM Partners: Mining niche seams brings rich returns
Despite broader headwinds for the sector, secured lending into niche areas of the European residential real estate market offers compelling risk-adjusted returns, says Adrian Cloake, chief investment officer at LCM Partners.
Northleaf Capital Partners think esoteric and niche: The benefits of low correlation in speciality finance
Music royalties, healthcare receivables and legal finance are all well-diversified, low-correlation investments suited to a range of market conditions. David Ross, CJ Wei, Jeff Perrin and Victoria Li of Northleaf Capital Partners explain why.
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