Regulatory Alignment and Capital Efficiency

Perhaps one of the most compelling features of Private ABF is its compatibility with recent regulatory reforms. Updates to the Solvency II Matching Adjustment (MA) framework have improved capital treatment for a broader range of privately-structured assets. When appropriately structured, Private ABF instruments can offer predictable, long-dated cash flows that align well with MA criteria.

This can make Private ABF an attractive addition to an existing private credit allocation as it supports not only the objective of meeting return targets, but also reinforces resilience against mark-to-market volatility and regulatory headwinds.

Structural Protections and Portfolio Control

A key feature of Private ABF is the degree of control and protection it can afford to investors. These strategies are typically built on highly structured exposures backed by the value of a tangible asset, such as consumer assets, residential housing, commercial real estate, or hard assets like infrastructure or equipment. Transactions are housed in bankruptcy-remote Special Purpose Vehicles (SPVs), insulating collateral from sponsor-related credit risk and ensuring a direct link between underlying cash flows and investor returns.

Insurers may also benefit from customised transaction terms. Payment structures can be designed to mirror liability cash flows, reducing prepayment or reinvestment risk. Direct negotiation enables asset managers and insurers to implement bespoke covenant packages and gain access to granular, often proprietary, asset performance data. This informational edge not only strengthens underwriting but supports more precise cash flow modelling — a critical consideration in the context of MA portfolios.

Diversification and Uncorrelated Credit Exposure

Private ABF can offer insurers a source of diversification that is both meaningful and measurable. Unlike corporate credit, which is often exposed to correlated economic and market risks, Private ABF provides access to sectors with distinct cash flow drivers and credit behaviours. These include consumer finance (such as credit cards, auto loans, or student finance), residential and commercial mortgage-related assets, fund finance (e.g. NAV loans and CFOs), and operational real assets like digital infrastructure, equipment, or trade receivables.

These sectors have historically demonstrated lower sensitivity to interest rate shifts and a reduced correlation to both public credit and equity markets. This diversification can serve as a counterbalance to broader market drawdowns or volatility. In an environment where insurers are seeking ways to reduce concentration risk and enhance downside protection, the uncorrelated nature of Private ABF exposures can be a compelling complement.

Spread Premiums and the Complexity Advantage

Finally, Private ABF also offers the potential for enhanced returns through a combination of illiquidity and complexity premia. Well-structured Private ABF strategies can deliver a material spread premium above comparable investment-grade public credit, without necessarily taking on additional credit risk. This excess return is largely driven by the private nature of the transactions, the customisation required, and the limited competition for certain asset types.

This can be referred to as a form of “complexity arbitrage”, where institutional insurers, with the scale and sophistication to structure bespoke transactions, can secure better economics than available in more commoditised markets. These transactions are not only structured to reflect the needs of long-duration liabilities, but also designed to avoid early redemption, incorporate robust investor protections and maintain performance visibility through direct asset-level reporting.

Conclusion

In the context of rising uncertainty, changing regulation, and increasingly constrained public markets, we believe Private ABF provides insurers with a credible and flexible path forward. It combines the attributes most needed by insurance investors today: yield enhancement, stable predictable cash flows, downside protection, and portfolio diversification.

When managed by an experienced partner with access to proprietary origination and underwriting platforms, Private ABF can help insurers access these benefits in a disciplined and scalable way. For insurers seeking to strengthen solvency, reduce capital drag and improve long term return profiles, Private ABF is emerging as a potential core building block of the next generation of insurance portfolios.

Drawing on more than a decade of experience managing private credit portfolios for insurers globally, MetLife Investment Management (MIM) has seen growing institutional demand for Private ABF strategies that align with Matching Adjustment (MA) requirements while delivering consistent long-term returns. MIM’s platform is designed to meet these needs, combining private market sourcing, structuring expertise and regulatory awareness across jurisdictions.

Disclosure

This material is intended solely for Institutional Investors, Qualified Investors and Professional Investors. This analysis is not intended for distribution with Retail Investors.

This document has been prepared by MetLife Investment Management (“MIM”)¹ solely for informational purposes and does not constitute a recommendation regarding any investments or the provision of any investment advice, or constitute or form part of any advertisement of, offer for sale or subscription of, solicitation or invitation of any offer or recommendation to purchase or subscribe for any securities or investment advisory services. The views expressed herein are solely those of MIM and do not necessarily reflect, nor are they necessarily consistent with, the views held by, or the forecasts utilized by, the entities within the MetLife enterprise that provide insurance products, annuities and employee benefit programs. The information and opinions presented or contained in this document are provided as of the date it was written. It should be understood that subsequent developments may materially affect the information contained in this document, which none of MIM, its affiliates, advisors or representatives are under an obligation to update, revise or affirm. It is not MIM’s intention to provide, and you may not rely on this document as providing, a recommendation with respect to any particular investment strategy or investment. Affiliates of MIM may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives) of any company mentioned herein. This document may contain forward-looking statements, as well as predictions, projections and forecasts of the economy or economic trends of the markets, which are not necessarily indicative of the future. Any or all forward-looking statements, as well as those included in any other material discussed at the presentation, may turn out to be wrong.

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For investors in the EEA: This document is being distributed by MetLife Investment Management Europe Limited (“MIMEL”), authorised and regulated by the Central Bank of Ireland (registered number: C451684), registered address 20 on Hatch, Lower Hatch Street, Dublin 2, Ireland. This document is approved by MIMEL as marketing communications for the purposes of the EU Directive 2014/65/EU on markets in financial instruments (“MiFID II”). Where MIMEL does not have an applicable crossborder licence, this document is only intended for, and may only be distributed on request to, investors in the EEA who qualify as a “professional client” as defined under MiFID II, as implemented in the relevant EEA jurisdiction. The investment strategies described herein are directly managed by delegate investment manager affiliates of MIMEL. Unless otherwise stated, none of the authors of this article, interviewees or referenced individuals are directly contracted with MIMEL or are regulated in Ireland. Unless otherwise stated, any industry awards referenced herein relate to the awards of affiliates of MIMEL and not to awards of MIMEL.

¹ As of June, 2025, subsidiaries of MetLife, Inc. that provide investment management services to MetLife’s general account, separate accounts and/or unaffiliated/third party investors include Metropolitan Life Insurance Company, MetLife Investment Management, LLC, MetLife Investment Management Limited, MetLife Investments Asia Limited, MetLife Latin America Asesorias e Inversiones Limitada, MetLife Investment Management Japan, Ltd., MIM I LLC and MetLife Investment Management Europe Limited.