The FABN Opportunity: A Look at Issuer Fundamentals and Market Appeal

Global earnings growth is exceptional, but much of it is concentrated in AI infrastructure and energy, while cash generation has lagged and margins are already near historic highs. Can corporate profits withstand higher inflation, and can the AI earnings boom endure as new supply comes online? The International Equity Team examines the durability of today’s earnings backdrop and why resilient quality compounders may offer a compelling opportunity.

Funding Agreement Backed Note (FABN) issuance has accelerated sharply in recent years, prompting the NAIC to propose enhanced disclosure requirements. This insight takes a closer look at FABN issuance, comparing the financial profiles of FABN issuers with the broader life insurance industry to assess whether their use has resulted in meaningfully higher risk. We also flag where recent regulatory and rating agency changes may be creating new portfolio opportunities within the CLO space.

Morgan Stanley Investment Management, through investment funds managed by Morgan Stanley Real Estate Investing (MSREI), announced today the acquisition of a newly developed Class A industrial facility located in Stafford, Virginia for $172.1 million. The facility is subject to a long-term net lease agreement with J.E. Richards, with the lease guaranteed by investment grade parent company Quanta Services, Inc., a leading provider of specialty infrastructure solutions.

In this edition of Caron’s Corner we discuss interest rates and their effect on private investments with Josh Myers, a member of the Portfolio Solutions Group and its Real Assets Investment Committee.