Collateralised Fund Obligations (CFOs) and rated feeder structures are rapidly moving from niche financing products into mainstream private markets solutions, according to panellists at Funds Europe‘s European Fund Finance Securitisation Forum, held in London today.
Panellists on a session on CFO market trends session pointed to surging investor demand, insurance capital inflows and increasingly sophisticated fund structures driving growth across the sector.
Moderating the discussion, Cadwalader partner Nick Shiren said the market has evolved dramatically in just a few years, with conferences now dedicating entire sessions to products that were once considered highly specialised. Shiren described rated feeders as effectively “a CFO for a single fund,” noting that both structures use similar financing technology to convert equity-style fund interests into products suitable for fixed-income investors.
Thomas Speller of Kroll Bond Rating Agency (KBRA) said the growth has been striking. KBRA alone rated around $26bn of CFO issuance last year, suggesting the wider market likely exceeded $30bn. He noted that rated feeders and CFOs are increasingly being used not only for fundraising but also as flexible portfolio management tools. “These structures open up a new source of investment,” Speller said, particularly from North American insurance companies seeking investment-grade exposure to private markets.
Matt Hansford of Barings said insurers have become central to the market’s expansion as they search for higher-yielding assets that still satisfy regulatory capital requirements. He argued that fund finance products are particularly attractive because they allow insurers to access private market returns through rated debt instruments rather than direct equity exposure. Hansford also highlighted the growing importance of portfolio management and balance sheet optimisation for large private market managers.
The panel explored how asset classes within CFOs are broadening beyond traditional middle-market direct lending. Speller said secondaries, asset-based finance and infrastructure assets are all becoming increasingly common within diversified structures. He added that infrastructure strategies linked to AI and data centre development are emerging as a particularly important trend.
Hansford noted that diversification is one of the key attractions for investors, especially in GP-led transactions where multiple funds and strategies can be combined into a single financing structure. However, both panellists stressed that complexity has also increased. Structures now frequently include multiple tranches and liquidity facilities designed to meet the needs of a wider range of investors.
The discussion also focused heavily on the internationalisation of the market. Speller said more European managers are now using CFO technology to attract North American insurance capital, while UK and European investors are gradually becoming more comfortable with the structures. Hansford added that pension funds are also beginning to explore the space as they search for enhanced fixed-income returns.
The panel concluded that continued innovation, broader investor participation and the global expansion of private credit markets are likely to drive sustained growth in CFOs and rated feeders over the coming years.
