1. The ABS East conference is now fully in-person to Miami after two years of social distancing! What has changed since you last did the conference and what’s on the agenda?

ABS East in December of last year was both virtual and in person, so people have had a number of opportunities to get back into the swing of things. For me, I see the difference from last year being a larger crowd, and more people are talking about being active during the conference. 

Last year, we battled fears of travel and Covid spread. All that seems gone now. No surprise to conference attendees — the conversations I have been having of late primarily relate to rates, market volatility and liquidity.

2. Borrowing costs are rising, and deal flow is slower deal flow. How are you addressing that?

My firm, LordCap Green, focuses on fixed-rate, long-term structured financing for ESG. Our position remains that there is enormous value in these products and, especially as the market for other financing products has been challenged, there is enormous opportunity for structured debt. Rate increases are a challenge for many, but the cost of financing is always assessed on a relative basis, so the goal is to be a competitive source of funds.

3. And how are you addressing those factors in terms of the conference agenda in Miami?

As FIIN, we are coordinating with investors and issuers to focus on these variables, and the impacts. 

So many participants were not in these markets the last time rates were this high — and even at these levels, we’re still below certain historical averages — so the discussions are intended to focus around addressing volatility and still having liquidity.

The painful rate environment has to a certain degree shifted the focus of liquidity to the secondary markets given that primary issue has slowed significantly or even ground to a halt for some asset classes.

4. Private credit has stepped in to take deals away from the broadly syndicated space. Do you think that trend is here to stay, and how do you plan to address it at the conference?

Very much so. In recent years, we have seen a significant uptick in private credit, across asset classes. The recent market volatility has only driven more issuers (even those active in the 144A space and public markets) to alternative debt solutions. The conference has a number of panels around private debt and we expect lively discussion.

5. There has been a growing call for more transparency in securitized products, and blockchain has been touted as a solution for this. Has blockchain actually solved or improved anything yet? Do you think it ever will?

So far, blockchain implementation in the structured credit markets has been very limited.  The concept is a great one, but the challenge remains making it scaleable at an economic cost for issuers and investors.

I think we’ll get there, but more time is needed. Governance around securitized transactions is already fairly robust, so while blockchain is viewed to enhance this, wide acceptance will come when it is operationally consistent for issuers with current practice.

The use of blockchain in securitization to this point has largely been to manage deal documentation and pre-purchase diligence. It’s definitely in the early innings, but ultimately the goals would be to broaden the investor base and simplify the issuance progress by creating efficiencies that should lower issuance costs.

6. ESG is becoming a bigger point of focus for structured finance and credit, but the movement has also come under intense criticism lately. What is FIIN doing to address this?

Pertaining directly to our broad member base, we have an ESG Task Force, which looks at relevant investor concerns and issues. One of our primary missions is education, and ESG is a core part of that — helping folks across the market understand many of the issues that are out there as ESG continues to grow in popularity.

But we don’t stop there. Our Women@FIIN initiative is intended to help drive the dialogue about not just what we invest in as the buyside, but also how to increase opportunities across the industry.

Members of FIIN are also active in industry-wide initiatives to promote ESG disclosure frameworks in the structured products space, which should give issuers and investors more confidence in the ESG integration of securities and investment strategies.

7. How well is the structured finance market prepared for a recession, and the potential for a wave of corporate and consumer defaults?

I see our market as well-prepared for a downturn. Securitized transactions are structured with stresses applied to expected cash flows, which are intended — based on the class and ratings level — to address an expected event for the portfolio.

Outside of the mortgage market, the global financial crisis showed these structures were basically sound, and having the data from that period as part of the analysis now provides an even more robust analysis.

Regulations and standard business practices have largely eliminated many of the predatory lending practices that resulted in the MBS market meltdown during the crisis. Deal disclosures and transparency have increased broadly across structured products, and preliminary data suggests that while credit performance is deteriorating to some degree, borrowers are performing largely in line with the assumptions built into structures.

8. It’s been five years since the #MeToo movement began. How has gender diversity in the finance industry changed over that time, and what is the Women@FIIN group doing to improve it?

Women@FIIN was created specifically to empower women in the finance industry. It offers a host of resources to assist in elevating diversity and inclusion across firms, and has a number of important mandates:

1. Develop content that is of use for women in structured finance
2. Host networking events with the express purpose of fostering new connections
3. Nominate women to join FIIN and serve as a resource to the Board and Committees, all of which are seeking gender parity
4. Further the voice of women at FIIN-sponsored conferences and by contributing content for editorial work
5. Serve as role models and mentors for the next generation of women in alternative finance

9. If you could choose any person (alive or dead) to deliver a keynote address at ABS East, who would it be?

I would love to have a dual keynote discussion with Adam Smith and Karl Marx. It would be fascinating to get their take on our economic system — and to let them debate who was right!