The big surprise in the Australian structured credit market this year has been the very strong growth in the issuance of asset-backed securities, and one of the questions up for discussion at yesterday’s Australian Securitisation Forum annual conference was whether ABS issuers can keep up the momentum. In a market update, Brad Schwartz, a director in structured finance at Westpac Institutional Bank, said public issuance of ABS, RMBS and CMBS stands at A$49 billion so far this year and, with transactions in train, will set a post-GFC record of more than $50 billion. ABS has been the driver of growth, with issuance doubling to $12 billion year-on-year. RMBS issuance has been steady. Part of the reason for this growth is the shift of auto finance origination from banks to non-banks and a greater reliance on the securitisation market for funding.  Macquarie Bank sold its auto dealer finance business to Allied Credit in 2021 and Westpac sold its auto loan book to Angle Finance in the same year. Both companies are active in the ABS market. Another reason ABS issuance has picked up is that some non-banks lenders have found the highly competitive conditions in the home loan market difficult to manage and have sought to diversify their lending activities.  June McFadyen, group treasurer at Allied Credit, said that when she got into the ABS market in 2011, there were three issuers. Today there are 12. McFadyen is positive about the prospects for the ABS market but accepts there are challenges. She would like to see more of the investors who buy RMBS take more of an interest in ABS. She said Allied did a roadshow this year to raise awareness among investors. Firstmac chief financial officer James Austin said another challenge was that ABS issues are quite diverse (including auto finance, credit cards and equipment finance), requiring more work from investors to assess them. And another challenge is that some of the issues are too small to interest institutional investors. Stephen Martin, the head of ABS at Challenger Investment Management, said the move by lenders to “widen their funnel” raised questions about the credit quality of their new lending activities. “You can’t rule out a shakeout,” Martin said. Liberty Financial chief financial officer Peter Riedel was more positive, saying ongoing ABS issuance of $10 billion or more a year would attract interest from overseas buyers. Westpac’s Schwartz said ABS was gathering steam in the secondary market, with liquidity increasing. He said one reason investors are attracted to ABS is its short tenor compared with RMBS, which provides portfolio diversification.