{"id":508626,"date":"2026-04-02T08:37:18","date_gmt":"2026-04-02T08:37:18","guid":{"rendered":"https:\/\/www.newsbeep.com\/uk\/508626\/"},"modified":"2026-04-02T08:37:18","modified_gmt":"2026-04-02T08:37:18","slug":"inside-the-mind-of-the-srt-professionals-on-the-frontline-of-any-future-financial-crisis","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/uk\/508626\/","title":{"rendered":"Inside the mind of the SRT professionals on the frontline of any future financial crisis"},"content":{"rendered":"

Catastrophe has been averted. Donald Trump has indicated<\/a> that war in the Middle East may be over in three weeks’ time. Equities are rallying. The oil price is falling. Private credit will live another day, and banks’ loans to private credit firms will endure.\u00a0<\/p>\n

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Even if those loans don’t endure, it shouldn’t matter: the risk has been transferred elsewhere. As the Wall Street Journal<\/a> observed last week, banks have tripled their lending to private credit and private equity firms to over $300bn since 2018. At the same time, though, they have protected themselves from the risk of defaults through “significant risk transfers” (SRTs), in which another entity (usually a fund) takes the hit if the private credit loans aren’t repaid. The IMF estimates that $1 trillion of risks have been transferred off banks’ balance sheets via such SRTs.<\/p>\n

That’s a lot. Bloomberg<\/a> says last year was a record. $41bn of SRTs were issued, up from $29bn in 2024. Everywhere from Macquarie<\/a> to Bank of America, <\/a>to HSBC<\/a>, JPMorgan<\/a>, Citi,<\/a> UBS <\/a>and Deutsche Bank <\/a>has been at it. Morgan Stanley even has an SRT linked specifically to its private loans<\/a>, although most SRTs are attached to corporate loans.\u00a0<\/p>\n

Growth in SRTs has been matched by growth in SRT jobs. William Ledger was among those riding the wave. Ledger spent 33 years at JPMorgan and was global head of the US bank’s credit portfolio until December 2025. \u201cAn SRT is a bit like a very large credit default swap crossed with a collateralised loan obligation,” he tells us. “Banks may have portfolios of 100 or 1,000 loans and they will have an assessment of potential losses on those loans in stressed environments. Using an SRT, they are able to buy protection against losses on their portfolio so that they longer have to hold capital against the tranche for which they\u2019re protected.”<\/p>\n

SRT jobs have proliferated in banks and funds. The latter include hedge funds, specialist credit funds, pension funds and insurance companies.\u00a0<\/p>\n

Edward James, a London headhunter who specialises in structured credit and SRTs, says the SRT employment market is growing, but not enormous. “There are maybe 400-500 people in total,” he says. They are mostly in London. European and UK banks account for an estimated 70% of SRT issuance. “London is the global hub,” says James. “There’s excitement about the potential for the US.”\u00a0<\/p>\n

SRT professionals in banks structure deals and work closely with credit portfolio managers. \u201cWithin banks you have folks who own the portfolio, plus a structuring desk,” says Ledger. Deals include everyone from, “the treasury team to capital, market risk professionals, valuation experts, and advisors.”<\/p>\n

Leading movers on the SRT banking dancefloor include people like David Saunders, formerly of Barclays and now head of the securitized products group for Europe at Santander. Third party advisors like Alvarez & Marsal <\/a>can also be found offer SRT advice. A&M’s team is run by Robert Bradbury, its head of structured credit execution.\u00a0<\/p>\n

The art of SRT structuring is the art of tranches. As in a CLO, the tranches determine who bears the losses. In a package of loans worth $100m, there might be two tranches of $5m which are sold to investors, while banks keep the remaining $90m. The first $10m of losses is therefore covered by the SRT and banks don’t have to hold capital against it.\u00a0<\/p>\n

“The question becomes how thick the tranche should be in order to optimize capital efficiency,” says Ledger. ” The tranche thickness is often 0-10% and SRTs insure against losses in that range.\u201d<\/p>\n

If bankers working on SRTs spend their time thinking about tranches and capital efficiency (while SRTs reduce capital requirements, they come with a charge), investors issuing SRTs spend their time deep in the analysis of what exactly it is that they are taking on.\u00a0<\/p>\n

“On the fund side you have portfolio managers, structurers and analysts again,\u201d\u00a0says Ledger. \u201cInvestors in SRTs will do an awful lot of analysis on the underlying portfolio, looking at correlation between borrowers and the base case and stressed expected loss. There will be a commercial negotiation about what goes into the SRT, with the overall framework signed off by regulators.\u201d<\/p>\n

SRT analysis can be considerable. Independent information on the loans underpinning SRTs is not always available, although banks will often provide a lot of data. “You have to scratch around,” says one insider. On the fund side, key names include the likes of Frank Benhamou, a former MD of structured finance at Barclays who moved to Cheyne Capital in 2024, Syril Pathmanathan \u00a0(ex-Credit Suisse and DE Shaw at Jain Global), Kaelyn Abrell at Arrowmark, or Sara McGinty (ex-Morgan Stanley real estate) at Ares.\u00a0<\/p>\n

If SRTs function as intended, all is fine. SRTs are almost always funded transactions, meaning that if there is an expected loss of $10m on a $100m portfolio, the bank will hold the actual cash against the loss while paying a fee. Everyone wins. Banks get to reduce capital requirements. Funds get a steady source of income. It’s this capital optimisation play, rather than the hedge against loan defaults, that has historically been SRT’s main selling point.<\/p>\n

But what if things go wrong? “Defaults and credit events haven’t really started ticking up yet,” acknowledges one insider. SRTs are highly opaque and portfolios are typically priced over seven to 10 years, during which all manner of things can change.\u00a0<\/p>\n

There’s also the question of circularity. In theory, regulators would object if banks were lending either directly or indirectly to the very funds that are issuing them with the SRTs. In reality, there is limited visibility on this and regulators are fretting about blind spots.<\/a> \u201cYou are betting on financial infrastructure not crumbling,\u201d one investor told the FT. <\/a>\u201cThese [banks] have all these loans out to multi-managers, out to all sorts of [funds], and you\u2019re just hoping that the margin call mechanism works and that these guys have liquidity. It\u2019s just hard for us to understand the screw that ties this together.\u201d\u00a0<\/p>\n

In the meantime, SRTs are growing and hiring, and paying. The bucks are big, if not the biggest. “There are some people in the London SRT space on packages of around \u00a31m, but \u00a3150k-\u00a3300k are far more common,” says one headhunter. “It’s been a very niche area.” One portfolio manager working with SRTs says it’s hard to find good people: “Not many have the right experience.”<\/p>\n

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