Why private markets are reshaping the future of ABS
Private placements are no longer a niche feature of securitisation — in fact, they are becoming one of the key forces defining the ABS market itself. As private capital broadens the investor base and pushes structures in new directions, issuance will expand not only across traditional sectors but into entirely new and once unthinkable asset classes. What can be securitised? Increasingly, almost anything.
After a strong year of growth, the question facing the market is just how quickly assets can be structured, monitored and absorbed. The range of collateral now finding its way into transactions is broader than at any point in the market’s history. And while there is some sector divergence, with parts of the market expected to contract, that overarching growth shows no sign of slowing.
European securitisation issuance rose again in 2025, increasing by 4% to €261.1 billion following a strong recovery in 2024. Established asset classes such as pan‑European CLOs, UK RMBS and German Auto ABS remain resilient. But the clearest signal of where the market is heading lies beyond these core sectors, in the rising acceptance of newer collateral types — from solar and data‑centre ABS to the early emergence of BNPL‑backed transactions.
This expansion is not simply a function of structuring innovation or plentiful collateral. It reflects a deeper shift in capital markets: the growing influence of private markets on how ABS deals are designed, governed and monitored.
The private markets effect
It is not just strong collateral and structuring that is behind this growth. Private markets are now a significant part of the equation. They are shaping structures and influencing covenant and monitoring expectations, and a new type of hybrid thinking that incorporates both a securitisation and private credit approach is gaining traction across the sector.
This shift is materially widening access to the market. ABS is becoming more accessible to a broader set of issuers as deal structures increasingly appeal to private and, in some cases, retail investors alongside institutions. While institutional investors continue to favour scale and standardisation, private capital is widening the opportunity set, enabling specialist and first‑time issuers to access funding where they might previously have struggled.
Nowhere is this more visible than in digital infrastructure. Data centres, in particular, illustrate how securitisation is evolving to support growth sectors more directly. According to Hogan Lovells, data centre ABS issuance in the US is expected to grow from about US$8 billion today to nearly US$25 billion by 2028 while CMBS of data centres now account for approximately 30% of data centre financing deal volume. In Europe, the first two publicly rated transactions took place in 2024 and 2025.
Pushing the boundaries of collateral
These transactions are stretching conventional definitions of financeable collateral. The successful securitisation of high‑performance graphics processing units by AI cloud computing firms demonstrates the potential for ABS to fund innovation directly — rather than merely financing mature consumption assets.
That potential comes with challenges. Novel asset types raise difficult questions around useful life, technological obsolescence and depreciation that traditional ABS frameworks were never designed to address. Similar dynamics are evident in asset classes built around recurring revenue and subscription models, including industrial and medical equipment leasing and media subscriptions. Their reliance on technology introduces servicing, distribution and trigger mechanics that differ substantially from more established structures.
The market is adapting, but learning is taking place in real time.
Risk, reward and renewed discipline
Deal structures are increasingly important and investors will pay for stronger credit enhancement, cleaner data, and better servicers. They will be looking far more closely at data lineage, underwriting integrity, and servicing quality. As a result, issuers with weak reporting or governance will find the market much tougher to access.
Spreads remain tight for now, which makes the hunt for high-quality returns even more intense. There is more appetite for lower tranches, but investors are aware that subordinate risk will reprice faster when downgrade risk rises.
Prime collateral remains resilient, but pockets of subprime risk are becoming stressed, putting pressure on mezzanine and subordinate tranches. There is still healthy hedge fund appetite for first-loss risk, but most investors still won’t go below AA and AAA tranches.
Buyer beware
Greater participation brings greater responsibility. Retail and private investors were largely absent from this market during the 2008 financial crisis, and their behaviour in a sustained downturn remains largely untested. As such, today’s ABS market increasingly consists of a hybrid investor base with divergent expectations, protections and risk tolerances.
And as a result, operational and verification risk has moved sharply up the agenda, particularly following several high‑profile fraud cases over the past year. Investors are paying closer attention to risks that models alone cannot identify — double‑pledged collateral, weak underwriting controls, ineffective servicing and poor data provenance. Surveillance expectations are rising, and issuers should expect significantly greater scrutiny at loan and asset level.
Complexity, automation and the role of judgement
As collateral becomes more complex, some deal structures will inevitably follow. New asset types such as digital infrastructure require more sophisticated measurement of operating risk, re‑contracting risk and obsolescence. Understanding the collateral is no longer a procedural exercise — it is fundamental to market credibility.
Undoubtedly, AI will play an increasingly important role in this. It is already improving efficiency in due diligence, reducing manual review of loan tapes and prospectuses and allowing teams to focus on structural vulnerabilities and tail risk. But technology is not yet a substitute for expertise. Informed judgement and experienced oversight remain essential, particularly as markets continue to evolve faster than established precedent.
The road ahead
Despite heightened geopolitical uncertainty, the outlook for securitisation in 2026 remains robust, if not record-breaking. Investor demand is diversifying, the deal pipeline is broadening and the range of assets underpinning issuance continues to expand.
Those best positioned to benefit will be the issuers that adapt. High quality assets, strong governance and credible structures will attract sustained demand. And as private placements continue to gain prominence, the ABS financing toolkit will become more flexible, powerful and inclusive. The net is widening — but it is only those prepared to meet rising standards that will succeed.
