Welcome to Lender Lens, our series for profiling leaders in the Lender community.
With private credit playing an increasingly important role in the financial system, we wanted to find out how lenders are navigating the evolving landscape and how they assess the market in the coming years.
Dealmaking has become more complex in today’s market — and private credit is adapting.
As insurers continue searching for ways to enhance portfolio returns while managing risk, asset-backed securities (ABS) have emerged as an increasingly important component of institutional investment strategies. Supported by strong issuance volumes, expanding asset classes, and the rise of digital infrastructure financing, the ABS market is experiencing significant momentum.
In this edition of Lender Lens, we speak with Mike Nowakowski, Managing Director and Head of Structured Products at Conning, about the evolving role of structured credit in insurance portfolios, the factors driving record ABS issuance, and the sectors he believes offer the most compelling opportunities today. From fiber networks and transportation assets to the growing niche of music royalty securitizations, Mike shares his perspective on where investors are finding value in an increasingly dynamic market.
How has the popularity of ABS lending impacted Conning’s investment approach in recent years?
Over the last five years, insurers have become more sophisticated in terms of their understanding of certain asset classes. This includes asset-backed securities (ABS) –a market that has seen significant growth over the last few years and has also been a focus for us. Conning conducts an annual risk survey of North American insurers, which covers broad positioning topics across the industry, including topics such as how they’re thinking about their balance sheets. This year’s survey findings showed that insurers continue to seek to increase their portfolio returns and profitability, leading to greater interest in ABS and structured products compared to prior years.
Conning brings years of structured product expertise; it’s part of our public and private market offering and complements most institutional investors’ portfolios. These solutions provide structural protections that the unsecured investment grade and high yield markets do not. Financing solutions are often backed by hard assets that offer recovery values if things go sideways. All in all, our disciplined approach to structured products has stayed consistent, but client curiosity has brought a lot of extra demand into the sector.
How is Conning differentiating itself from its peers?
Conning has a long history of serving insurance companies. We understand their particular investment portfolio risk management constraints as it relates to asset and liability management (ALM) as a business. We’re the only third-party asset manager with a dedicated insurance research team, and that gives Conning’s clients industry and business lines specific insight on the investment side.
Structured credit has become an increasingly important part of the investment mix and portfolio construction, also for insurers. Once considered “core plus” investment options, structured products generally made-up smaller portion of insurers’ portfolios. Notably, over the last few years, there’s been growing demand for structured credit and agency mortgages, as they offer different levers in different rate, spread and market environments. We can adjust investment options by finetuning structure, credit, duration, curve, convexity or coupon type. All in all, the flexibility of structured products helps insurers achieve their investment goals. Structured products have seen a lot of interest across all types of insurers; there’s different duration and credit options for every level of risk tolerance.
Issuance of asset backed securities is expected to reach $385.2 billion in 2026. What is driving ABS demand?
Spreads have been a bit on the tighter end of the range over the last three years. That said, all-in yields for the sector are still very attractive. We’re in this higher rate environment and it doesn’t seem like the Fed is going to be able to cut this year. In this environment, we like deals that are backed by hard assets, for example container leases and rail car leases –something that you can touch, that has some recovery value.
We also like some of the new fiber network assets that are coming out, both residential and commercial. Fiber build out is also a result of this digital infrastructure build, but it’s less tied to the data center story because people need it for their homes and businesses need it to operate. In terms of fundamentals, we think that’s an attractive sector right now.
Another quirky one we like is music royalty ABS. Artists are selling their rights to publishing and songwriting to certain companies, which then put those in master trusts and securitize them. They’re an interesting play because the initial underwriting for these deals is very conservative, 2% to 5% year-over-year growth in the cash flows. And we’ve seen many deals in the market that are far exceeding that underwritten growth. There aren’t really a lot of these deals out there, but when they come we take a hard look at the song catalog and who’s in them to make sure that we’re not getting stuck with a bunch of one hit wonders.
What is your favorite type of music, and has your personal music taste impacted what you look at regarding music royalties?
A lot of it depends on what I’m doing. If I’m snowboarding, I like something with a good beat like 90’s hip hop. But if I’m working out or trying to get pumped up for a game or something like that, I’ll put on some hard rock.
A lot of them are household names that we all know, so they’re very easy to say ‘oh, okay, I know that artist and I know that song.’ But on some of the deals that we’ve seen come in with newer artists, such as newer hip hop artists, we’ve had to rely on more junior members of our team to help us understand who they are and how popular they are.
