Operational capability underpins success in asset-backed investing

“The ability to originate, underwrite and manage assets on the ground is not a marginal advantage; it is central to risk management and value creation in a fragmented system.”

In Private Debt Investor’s Opportunistic and Distressed Debt Report, Toni McDermott, Head of Credit and Lending at Arrow Global, makes a case for Western European residential real estate lending as an opportunity for private credit investors.

Toni explains how Basel III and expected credit loss provisioning are reshaping bank behaviour, opening opportunities in bespoke, operationally intensive lending. With refinancing volumes rising and outcomes diverging by country and micro location, she argues that value comes from control, live information and the ability to originate, underwrite and manage assets on the ground. Further how Arrow is positioning by concentrating on senior lending where banks are not active, typically with around 35 to 40 per cent equity cushion beneath the loan, while remaining positioned to opportunistically evaluate secondary opportunities when pricing becomes dislocated.

For institutional investors, the message is clear: in a fragmented European system, operational capability is central to risk management and value creation.

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