July 23, 2024

TCW Group Launches $1 Billion Asset-Backed Finance Strategy Amid Bank Pullback


TCW Group, a Los Angeles-based asset manager, has unveiled a new private credit asset-backed finance strategy, securing $1 billion in investor commitments. The move comes as traditional banks scale back their involvement in structured finance. Dylan Ross, previously a partner at Brigade Capital Management LP, has been appointed managing director and portfolio manager to lead the initiative.

The focus of TCW’s strategy lies in securitizing various assets, including pools of consumer-finance loans, mortgages, and infrastructure debt. The asset-backed finance sector within private credit is gaining traction, providing investment opportunities beyond corporate debt as regional banks withdraw.

TCW, which already manages a $90 billion liquid securitized business, aims to expand its operations into private credit, also known as non-bank lending. The new initiative enables TCW to offer clients exposure to diverse asset classes, potentially yielding higher returns without significantly increasing risk. The move positions TCW as a significant participant in supporting the real economy through financing.

The asset manager’s private credit strategy will emphasize lending backed by commercial real estate, residential mortgages, hard assets, and financial assets. Transaction sizes within the strategy can reach up to $500 million for certain investment-grade asset-backed lending.

In a related development, Italy’s BlockInvest has revealed plans to tokenize two sets of non-performing loans (NPLs). Collaborating with asset-backed security (ABS) firm Centotrenta Servicing, BlockInvest will issue tokenized securities backed by NPLs. Additionally, BlockInvest is partnering with Davis & Morgan, a small bank, to tokenize non-performing mortgages. Both sets of tokens will be issued on the Polygon public blockchain.

BlockInvest, supported by Credit Agricole Italia, addresses a significant market potential in Italy, where non-performing loans amount to €300 billion ($327 billion). Tokenization of NPLs is driven by factors such as cost efficiencies, fractionalization to enhance liquidity, and the ability of blockchain to record the status and recovery process of individual NPLs.

The collaboration with Centotrenta Servicing involves natively tokenizing the ABS portfolio of NPLs on a blockchain, with potential offerings to CentroTrenta’s clients. The second project with Davis & Morgan, part of the Bank of Italy’s Fintech Hub on tokenization, aims to tokenize NPL mortgages. Private equity firm FGA Partners is also exploring tokenization of non-performing loans and mortgages, with tokens issued on the Pecu Novus blockchain network. The move aligns with the broader trend of tokenizing real-world assets, gaining momentum on blockchain networks.

Financial Desk

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