HSBC AM: Bank origination broadens private credit

October 5, 2026

Why are bank-originated assets relevant?

‘Bank-originated assets may strengthen portfolio construction with differentiated and potentially more defensive exposures while also supporting real-economy financing.

Specifically, these assets can offer:

• A differentiated risk-return profile: As investors broaden private credit allocations, bank-originated assets can complement core private credit by supporting diversification and defensiveness of alternative credit portfolios.
• Diversification beyond the core independent private credit origination: Exposures are often sourced through different origination channels, helping reduce concentration within a portfolio and mitigate ‘crowding risk’ related to capital deployment.
• A different risk profile and duration: It includes a range of strategies which can offer more senior and shorter-dated exposures, supporting a balanced maturity ladder and liquidity management through self-liquidating features.
• Structured solutions: Working with banks, bespoke solutions can be developed for investors that can create specific risk and return metrics which are not readily available from other sources of origination.
• Institutional-grade controls: Bank originated exposures typically bring disciplined underwriting and monitoring (credit committees, KYC, and fraud controls), with meaningful exposure available to investment gradeequivalent credit.’

How would you define bankoriginated assets, and could you provide a concrete example?

‘Bank-originated assets are credit exposures sourced through a bank’s origination platform, where the bank (co-)originates and may (co-)underwrite the loan or commitment, and completes approval and documentation alongside the investor. In some cases, structures can be established to transfer or share part of the risk with an investor (via sale, assignment, participation, or risk-sharing).

Examples of assets that are still largely held on bank balance sheets include Revolving Credit Facilities (RCFs) and Subscription Line Facilities (SLFs)/capital calls – revolving bridge lines to private market funds secured on LP commitments. These two examples of financing include an undrawn component that many investment vehicles find operationally difficult to hold efficiently. They stand at opposite ends of the credit spectrum, with RCFs usually in the B credit band, and SLFs aligned with a strong investment-grade credit rating (BBB- or higher).

Trade Finance is also typically originated by banks as international trade requires a global footprint spanning the two legs of a commercial transactions (buyer(s) and seller). It also requires a dedicated infrastructure to screen multiple counterparties and process large volume of invoices.

An area where both banks and non-bank lenders are active, and where bank origination can support a more conservative underwriting approach, is NAV Finance. NAV Finance – financing provided to private equity funds backed by their investment portfolios – when originated and held by banks, tends to feature more conservative LTVs than loans provided by non-bank lenders, which is typically conducive to an investment-grade credit profile.

Direct Lending – leveraged loans to private equity-backed corporates – can also illustrate both the origination advantage and more conservative underwriting, particularly when driven by a regional or local origination network where the access, length and strength of relationships play an important role.’

What role can bank-originated assets play within a broader private markets allocation?

‘Bank-originated assets can act as a complementary sleeve to core private credit. They may provide access to differentiated deal flow via bank relationship networks and infrastructure. For instance, HSBC has over 5,000 working capital specialists and access across 50+ markets.

These assets can potentially also support more defensive portfolio construction where they are more conservatively structured, senior, short-dated, and/or have built in structural protections.

Finally, incorporating bank-originated assets can provide a way to limit correlation and reduce crowding risk on assets that are less readily accessible or commoditised.’

What misconceptions do institutional investors commonly have about bank-originated assets?

‘One common misconception is that assets distributed by banks are necessarily of weaker credit quality. In reality, distribution is often driven by balance sheet efficiency or capital allocation, with bank-grade underwriting and monitoring. Investors must still ensure robust alignment of interests and the full independence of the portfolio manager in the selection of investment opportunities and credit assessment.

Another misconception is that bankoriginated assets are primarily leveraged loans. In practice, programmes can provide access to a diverse, relationshipled origination, and a meaningful share of exposures are investment gradeequivalent.’

To what extent do these strategies provide genuine diversification versus private debt, direct lending, and leveraged loans?

‘Bank-originated strategies can sit alongside traditional private credit but also serve as a separate return stream. Diversification is mainly driven by differences in underwriting, structure, origination dynamics, and underlying risk drivers.

Exposures such as NAV Finance and parts of direct lending are part of the same broader private credit continuum, but, when originated by banks, are often supported by established underwriting standards and monitoring infrastructure.

Other asset classes have more distinct characteristics. RFCs and SLFs often include revolving and undrawn components, which can make them operationally more complex for many investment vehicles to hold and manage. In SLFs, the primary risk driver is also a diversified institutional LP pool rather than operating company leverage, valuation, or cashflow generating ability. Trade Finance is underpinned by different dynamics as the financing is anchored in a commercial transaction, rather than a financing one.

Bank’s relationship networks and local presence can also enable differentiated sourcing through established origination channels, providing an origination advantage.

Differentiated origination across Direct Lending and Infrastructure Debt strategies can target market segments that are less competed for by general market participants.’

What role can these strategies play in helping investors manage liquidity in private markets?

‘These strategies can support portfolio diversification as well as liquidity management through asset-level cashflow or self-liquidating features. For example, trade and working capital loans or SLFs are typically short term and self-liquidating, enabling portfolios to ‘naturally unwind positions’ rather than relying on market or secondary sales in illiquid markets. In addition, banks can provide repeatable pipelines that help investors build diversified maturity schedules and create steadier investment pacing.’
  

SUMMARY Bank-originated assets can complement traditional private credit through differentiated origination, risk drivers and structures. More senior, shorter-dated and self-liquidating exposures can support defensiveness and liquidity management. Bank networks provide differentiated access to assets such as trade finance, RCFs, SLFs and NAV finance. Conservative underwriting and institutional controls can support investment-grade equivalent credit profiles. Different return drivers and origination channels can reduce concentration and crowding risk. Repeatable pipelines help investors build diversified maturity schedules.

 

^{Information/analysis provided is by HSBC Asset Management, August 2026. Diversification does not ensure a profit or protect against loss.}

 
Read the full article in Financial Investigator magazine