Last week, an estimated gathering of over 4,700 of the industry’s finest descended on Miami for IMN’s ABS East conference. The mood was upbeat and the meeting rooms (and the lobby bar) were crowded, as participants raced to fit in as many meetings as possible. If there was one overall takeaway from the conference, it was that there is a lot of money looking to invest in the ABS sector, which continues to enjoy strong fundamentals and a hearty appetite for deal making. We are excited to see all the term sheets that come out of this conference and help get some of those deals closed.
Notably absent from the panels were forecasts of imminent economic downturn and baseball metaphors to describe where in the cycle we are. While some panelists did identify areas to watch for signs of trouble (manufacturing, the SFR space, student loans, increases in “covenant-lite” deals), generally participants agreed that no significant danger signs have materialized yet, and that the near-term outlook is favorable. While one audience poll revealed that at least half the audience thought that a recession would occur in the next 18-36 months, our conversations revealed that at least some pollees suspect forecasts for the next downturn might be based more on a feeling that this cycle has just been going on too long rather than on any particular data points. Of course, many were also quick to point out that good data points are worthless in the face of black swans.
One area of growth that many participants were eager to discuss was PACE lending, both in the commercial and residential sectors. While the ability to pay rules that went into effect in California earlier this year and HUD’s latest change of heart have clearly reduced volume in the resi-PACE market, many expect that new PACE friendly legislation in Florida, Pennsylvania and Illinois will add fresh growth potential to the space. Commercial PACE lending seems to continue to be strong, with volume on track to match last year and the first three commercial PACE securitizations closing over the past year or so. This will definitely be a sector to watch.
Participants also squeezed into a number of panels on fintech, innovation and other changes coming to the industry. There seemed to be general agreement that blockchain and other technological innovations will have a starring role in the future administration of the industry, the question is more of a when and how. As was oft-repeated, blockchain remains a “solution in search of a problem” in much of the industry. Panelists acknowledged the feeling of déjà vu from what is now several years running of panels announcing “Change is coming!” While few institutions have implemented any of these new technologies, there seems to be growing agreement that we are approaching an inflection point, and some major institutions have announced concrete plans to explore and utilize some of these innovations.
Regardless of asset class, from autos to RMBS, and CLOs to credit cards, we were inspired to hear of all the innovation (technology-based and otherwise) that is going on in the market right now, as issuers compete to attract investors in a crowded environment.
