ABS East 2024: Six Takeaways from Miami

Another invigorating ABS East has concluded in Miami. The energy around loans, CLOs, securitizations, and alternative financing was inspiring.

From scheduled sessions to one-on-one conversations, there are some insights that caught our interest from the perspective of our trustee and agency services roles:

1. Public ABS + Private Securitizations = effective capital management.

Public ABS deals are still the go-to option for predictable pricing and liquidity, especially student loan deals. But private deals are gaining popularity because of their flexibility. Private deals can be used for things like warehouse financing, bridge loans, and whole loan sales, giving issuers more options. Using both public and private deals together helps manage capital more effectively. In a turbulent environment, ABS stakeholders see trustees as essential for minimizing disruption and handling transaction complexity.

2. Student Loan ABS performance is exceeding the liquidity bell curve.

Public student loan ABS is doing well despite economic challenges. Managing capital markets activity to maintain liquidity is helping spur positive flows, and companies are using term ABS deals for reasonable pricing. The expectation is for continued activity in 2025. Private student loans are performing in line with broader trends. As in other lending areas, private players are filling in the gaps left by banks that have pulled back. While defaults are a concern, they're still manageable.

3. Bracing for change post the Presidential election.

The U.S. election has added uncertainty to the regulatory and economic outlook, from student loan deals to automotive ABS. Panelists suggested that companies stay flexible and ready for regulatory changes, especially regarding Consumer Financial Protection Bureau (CFPB) rules and compliance. The strong state of consumer fundamentals is helping create calm but cautious optimism.

4. The grass is looking greener for fintech lending and capital markets.

The fintech space has grown, with business models shifting from direct-to-consumer (D2C) to more B2B2C and embedded finance. Raising equity funding is challenging for non-AI fintechs, and those with heavy balance sheets are feeling the squeeze. However, the environment is improving as rates decrease and green shoots reappear in venture funding. Regulatory scrutiny, particularly on the partner bank model, will also influence fintech evolution and the ability to continue experimentation in areas such as blockchain.

5. Appetites are growing for Collateralized Loan Obligations (CLOs).

CLOs are holding up well, offering solid returns despite ongoing economic uncertainties. With rising interest rates, easing credit spreads, and market volatility, CLO managers are diversifying their portfolios and maintaining credit quality to handle challenges. Investor appetite is returning. New managers have also been entering the scene, and regulatory scrutiny around risk retention and compliance is also shaping CLO deals. Still, CLOs are crucial for managing leveraged loan exposure and remain valuable in structured finance. The sector is hungry for supply of new loans.

6. ABS Markets stay the course after bouts of volatile weather.

Recent major storms have caused local disruptions, especially in real estate and insurance-linked ABS, but the overall market has held up well. Issuers are increasingly considering climate risks when structuring deals and ensuring proper risk management. Adapting and maintaining operations during these events is becoming a more significant focus for both public and private ABS markets, though there have not yet been major structural changes.

Contact us today

Our team left the conference inspired and energized by the vibrancy and forward-thinking nature of the securitization community. If we missed you or you didn’t have a chance to attend, we’d be happy to set up a call and connect with you.