Why Asset-Backed Securities Are NOT the Next Financial Crisis

Executive summary

Recent headlines within parts of the securitization market including subprime autos, niche consumer lending and digital infrastructure have prompted renewed scrutiny of credit risk across the broader structured finance landscape, both public and private. The collapse of Tricolor Holdings in September 2025—a subprime auto lender—and the bankruptcy filing of First Brands Group, an automotive aftermarket parts manufacturer, have understandably raised questions among investors about the underwriting standards and integrity of the asset-backed securities (ABS) markets.

Some of these concerns have impacted pricing on the growing public ABS market, while others have related to the private asset-based financing (ABF) market. However, in many of these instances, we believe the issues reflect idiosyncratic business models, allegations of fraud, concentrated borrower profiles or simply fear of overinvestment in the case of artificial intelligence related data center development. We do not view these as systemic weakness embedded, or developing in the broader securitized ABS market. Well-structured ABS transactions—particularly those backed by diverse collateral and seasoned issuers—remain insulated from many of the challenges facing private credit and specialized consumer lenders.

As investor confidence naturally becomes shaken by these headlines, indiscriminate selling pressure emerges, and spreads widen. In many cases, higher quality deals with strong structural protections and reputable sponsorship also sell-off. Yet, given a stable economic backdrop and resilient consumer profile, this market cleansing creates opportunities for alpha generation.