Asset‑Backed Finance at an Inflection Point

At Citi’s SPRINT Conference in London last month, the message that emerged from the panel discussions, private meetings and informal conversations was that asset-backed finance remains one of the most liquid and strategically important sources of capital for Europe’s alternative lenders, even as macroeconomic uncertainty continues to shape investor behaviour.

The conference, centred around the Fintech Lending Summit and attended by the UK’s leading asset-backed investors, saw capital providers offering equity, mezzanine and senior facilities to technology-enabled lenders operating across Europe come together. For Aluna Partners, the event provided valuable insights into investor perspectives on growth, risk and scale in the current environment.

Capital allocators have expressed a strong conviction that financing loans originated by alternative lenders with robust technology platforms represents excellent value. Digital origination and servicing capabilities are now considered essential, rather than just differentiating factors. The focus has shifted to execution, including the ability to scale origination while maintaining disciplined underwriting and transparent performance reporting.

This confidence is supported by strong performance. Loan books originated and serviced by European alternative lenders demonstrated notable resilience during the pandemic, and have continued to perform strongly across consumer, SME and auto lending segments. Several investors noted that the sector has matured considerably over the past five years, with lenders adopting more conservative risk frameworks, longer assessment timelines and greater use of collateral.

Capital availability, particularly on the equity side, is not the constraint that many originators fear. Equity investment remains available in both the UK and Europe to support first-loss positions in asset-backed facilities. Mezzanine capital is also accessible. Where transactions have stalled, investors have not cited a lack of appetite, but rather valuation expectations. In several cases, negotiations have been prolonged by alternative lenders seeking higher equity multiples than the market is currently prepared to accept, delaying the point at which senior lenders can deploy capital.
The scale of capital committed to the sector was a recurring theme throughout the conference. Over the past three years, more than €1 trillion has been deployed into asset-backed facilities across Europe, helping to bridge the structural funding gaps left by traditional banks.

This was emphasised during the opening session, Capital Trends and Strategies in an Uncertain Environment, which featured portfolio managers representing AB CarVal, Blackstone and PIMCO, three firms collectively associated with approximately $3 trillion in assets under management. Their discussion focused less on concerns about capital flight from private credit and more on macro risks that could affect asset performance, including political uncertainty, interest rate volatility and the inflationary impact of sustained high oil prices.

Although these risks are being closely monitored, none of the panellists recommended pulling out of asset-backed finance. Instead, the consensus view was that the market’s fundamentals remain intact, with risk management being the preferred option over risk avoidance.

One area of debate centred on facility size. Investors are increasingly comfortable offering facilities in excess of €100 million, even to lenders whose current origination volumes are well below that level. While this reflects competition among capital providers to secure relationships with top-performing originators, it also introduces potential tension. Several investors acknowledged the risk that oversized, uncommitted facilities could incentivise originators to prioritise volume growth over credit discipline, particularly in the early stages of deployment.

In addition to the headline investors, the market continues to demonstrate robust liquidity. During the conference, Aluna Partners met with over 20 alternative lenders, all of whom are actively exploring growth financing opportunities through forward flow agreements and warehousing facilities. These originators operate in various sectors, including consumer lending, SME finance and auto loans, and collectively represent a diverse and expanding origination base.

Discussions also covered syndication, a relatively new concept in private asset-backed credit, where senior lenders have traditionally preferred exclusive positions. While structural and legal constraints remain, the willingness to explore syndicated solutions suggests a gradual evolution in market practice.

In the context of asset classes, operating leasing has emerged as a leading segment, demonstrating notable growth and strong performance. In the UK, this growth is propelled by the consumer electronics sector, facilitated by strategic collaborations with prominent global brands. In the EU, the primary focus of operating leasing activity is machinery and industrial equipment. Investors have underscored the predictability of cash flows and asset recoverability as key benefits.

Alternative lenders have provided a frank assessment of the present challenges. Consumer lenders have acknowledged the increase in non-performing loans, particularly in regions of the European economy experiencing weak GDP and employment growth. In response, many are enhancing their risk frameworks through the increased use of artificial intelligence, broader datasets and more precise borrower segmentation. Prime borrowers are increasingly favoured over those with less favourable credit histories, and are often willing to pledge collateral.

This marks a significant change from the early days of fintech lending, when platforms targeted borrowers who were underserved by traditional banks. Nowadays, prime consumers are increasingly opting for alternative lenders due to their swiftness, transparency and user-friendly digital interfaces.

Auto lenders are witnessing comparable trends. Borrowers are more inclined to finance vehicles through digital platforms that offer swift decisions and competitive pricing. Concurrently, the perceived advantages of consolidating financial products with a single traditional institution have waned, particularly as banks have become more risk-averse without offering substantially superior pricing or service.

Interest rate volatility continues to be the most cited risk. Investors have described it as the most significant uncertainty they face, although this does not justify delaying capital deployment. In response, originators are adapting by offering variable rate products and strengthening asset liability management to ensure alignment between funding and lending profiles.

The discussions at Citi’s SPRINT Conference indicate that the European asset-backed finance market is likely to remain liquid, competitive and increasingly disciplined. Alternative lenders are better equipped to assess risk, more focused on prime borrowers and increasingly able to compete with traditional financial institutions on both the cost of funding and customer experience.

For investors and originators, the opportunity now lies in scaling responsibly. This means aligning capital structures early, maintaining underwriting discipline and ensuring that growth is supported by fundamentals rather than momentum.

© Aluna Partners Ltd, and APG Aluna Partners Group AG 2026. All rights reserved.

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