Asset-backed finance: a market view ahead of Global ABS 2026

The asset-backed finance (ABF) landscape is changing and as we approach the end of H1 2026 the ABF market is in focus for both positive and negative reasons and recent insolvencies have had ripple effects. Market participants and their lawyers alike are facing a fascinating inflexion point. 

Private credit fund appetite for ABF is increasing. Combining a vast and structurally growing addressable market^[1], with attractive risk-adjusted returns and genuine diversification away from the crowded and increasingly commoditised direct lending space, ABF is a component of the private credit ecosystem that offers tremendous room for growth.

In this note we consider key dynamics currently shaping the ABF market and what private credit fund managers ought to consider to best capitalise on the significant opportunities that lie ahead.

A market in rapid growth

In recent years the ABF market has seen a huge influx of capital from non-bank lenders keen to capitalise on the opportunity and innovation in this space. Industry estimates suggest the ABF market was worth approximately $6.1tn in 2025 and is predicted to grow to around $9 trillion by 2029^[2]. Private credit funds investing in asset-backed deals are both increasing in number and scale: new specialist private credit fund managers are forming, US private credit fund managers are increasingly looking to the UK and Europe as a market providing strong risk-weighted returns, and larger private credit fund managers are diversifying into standalone ABF strategies with the aim of increasing AUM and providing their limited partners with a differentiated and diversified product offering.

More capital being available has led to increased transaction volumes, funding availability at all levels of a borrower's structure and rapid structural innovation. We have seen appetite for funding across a broad spectrum of underlying asset classes and products, spanning both traditional areas of favour, such as bridge loans, SME lending and consumer finance, and products finding their space in the market including online marketplace receivables, sports and music receivables and esoterics such as divorce and probate financing. This enlarged opportunity set has led to the building out, and upskilling, of lending teams focussed on ABF, and the establishment and rapid growth of specialist advisors able to cover a broader range of sponsor and independent borrowers and to introduce them to the range of financing options available.

A well-trodden path has now been established for a new specialist lender to source growth capital, institutionalise with a high-advance-rate pre-securitisation structure offered by a blend of banks and private credit funds, and then scale with private warehouse facilities.

Recent challenges and market recalibration

However, recent challenges in the market, have caused some nervousness. These have arisen in the wake of recent high-profile situations such as Tricolor and First Brands in the US, and MFS in England - and related discussions on potential structural weaknesses in how warehouse lending and collateral management operate across jurisdictions, paired with broader public commentary about transparency in private credit as an asset class. As a result some lenders, particularly those already looking at losses, are wary of increasing their exposures to ABF and we have seen a degree of retrenchment, primarily from the bank community.

This is driving two important developments. First, the creation of funding gaps, both where certain lenders are pulling back from the market and, more generally, where borrowers are looking to introduce debt to their structures for the first time or to access more stretched financing. Notwithstanding this, there is sufficient capital available to fill those gaps, and the lenders who can do so in a structurally sound and well-underwritten way stand to benefit considerably. Secondly, there is a renewed and increased emphasis across all investors on proper reporting and collateral audit processes. Whilst this presents a challenge to the short term growth of ABF, it is too early to see exactly where the market will settle in relation to the implementation of new or enhanced guardrails. Whilst there may be a marginally increased cost burden on borrowers as a result of more extensive audit processes, both sides of the lender-borrower divide stand to benefit from the focus on robust processes and reporting.

It is possible that the current spotlight on portfolios brings to light further pre-existing issues as lenders conduct deep dives into their underlying collateral base. However we expect that the market will emerge with more stringent audit and monitoring processes as the norm and significant opportunities for bank and non-bank lenders alike to deploy capital, thereby giving borrowers even greater funding optionality than before.

Banks and non-banks: a symbiotic relationship

A final point of interest is the interaction of banks and non-banks in the space. Whilst one might perceive the two to be in competition, the current market is symbiotic. Given their respective price points and risk appetites, the senior and mezzanine landscape is healthy. Banks remain generally available for cheaper-priced senior lines at more conservative advance rates, whilst private credit funds take a mezzanine tranche, often at stretched advance rates, with a higher price point. Even where private credit funds are ostensibly in direct competition with banks by offering a stretched unitranche product, they are generally able to do so as a result of having fund leverage facilities from one or more banks, or through a behind-the-scenes partnership relying on bank capital to a greater or lesser extent.

Absent further issues of a similar nature, this provides a great breadth of choice for originators looking to enhance their growth prospects without over-relying on equity capital, and affords lenders a potential borrower base that is primed to support debt financing solutions.