Key Takeaways
- • Macfarlanes reports that asset-based finance (ABF) is growing in private credit as banks retreat from asset-backed and corporate cash-flow lending under stricter post-GFC regulation such as Dodd-Frank and Basel.
- • Five of the top 30 US private debt managers launched their first ABL-dedicated fund in 2024, and 58% of private credit managers surveyed by Preqin said they will prioritise an ABL strategy in 2025.
- • At least 13 bank-private credit ABF partnerships were reported between 2023 and 2024, including Sixth Street's commitment to invest up to $4bn in Affirm loans and Carlyle and KKR's joint acquisition of a $10bn student loan portfolio from Discover Financial.
- • In North America, 77% of the top 30 private credit managers (23 of 30) engage in ABF, versus 63% (19 of 30) in Europe, where only six managers offer ABL-focused products.
- • In January 2025, Sixth Street agreed a partnership with Northwestern Mutual to manage $13bn, primarily deployed into ABF.
Summary
According to Macfarlanes, much of private credit's growth has been driven by bank retrenchment and the financing needs of private equity. Banks have pulled back from corporate cash-flow lending, which carries higher risk and capital costs under tighter regulation, and have continued to retreat from asset-based finance. Macfarlanes defines ABF as any financing secured by specific assets, including loans, securitisations, leasing and factoring, while asset-based lending (ABL) is a narrower subset focused on loans to businesses secured by tangible or financial assets. Advance rates depend on collateral quality: the firm cites 80-90% against accounts receivable, 50-70% against eligible inventory, and 20-40% against machinery and equipment.
Manager activity expanded through 2024. Partners Group launched a multi-sector ABF royalties platform, with energy transition expected to represent 10-30% of the fund. The TCW Group established an ABF business with over $1bn in commitments, and Oaktree announced a $2bn fundraising target for its first ABF product. Apollo launched the Apollo Asset Backed Credit Company, a semi-liquid vehicle aimed at private wealth investors. Blackstone's ABC platform combined its ABF and insurance groups and, in 2024, acquired a $1bn infrastructure loan portfolio from Santander and $1bn in credit card receivables from Barclays. In ABL, Sixth Street launched Private Asset-Based Investment Fund I, Ninety One closed its European Credit Opportunities Fund I, Roundshield raised above its target for Fund V, Hudson Cove announced a £200m target for its inaugural ABL fund, and PIMCO is targeting $4bn for its first ABL fund, with half raised from two investors.
Bank partnerships became a cornerstone of the market, allowing banks to de-risk while giving managers access to deal flow. Notable examples include Sixth Street's up-to-$4bn Affirm loan purchase program, PGIM's $500m inaugural purchase of Affirm asset-backed loans, Apollo's Atlas SP partnership with BNP Paribas with initial commitments of $5bn, and Ares's commitment of up to $1.5bn to prime vehicle leases from Certified Automotive Lease Corp. Carlyle and KKR jointly acquired a $10bn student loan portfolio from Discover Financial at above par, after a competing joint offer from Sixth Street, BlackRock and CPPIB. Macfarlanes notes that the trend continued into early 2025, citing the Northwestern Mutual mandate, Point72's expansion of its private credit ABF strategy, and Mesirow's acquisition of Bastion Management.
Macfarlanes contrasts North American and European adoption. Banks account for roughly 70% of lending in Europe versus about 20% in the US. According to the ECB, net SME loan rejections by European banks rose 16% in Q4 2023 and a further 7% in Q3 2024, with demand for SME loans up 3%, which the firm presents as an opportunity for European ABF growth.
Manager activity expanded through 2024. Partners Group launched a multi-sector ABF royalties platform, with energy transition expected to represent 10-30% of the fund. The TCW Group established an ABF business with over $1bn in commitments, and Oaktree announced a $2bn fundraising target for its first ABF product. Apollo launched the Apollo Asset Backed Credit Company, a semi-liquid vehicle aimed at private wealth investors. Blackstone's ABC platform combined its ABF and insurance groups and, in 2024, acquired a $1bn infrastructure loan portfolio from Santander and $1bn in credit card receivables from Barclays. In ABL, Sixth Street launched Private Asset-Based Investment Fund I, Ninety One closed its European Credit Opportunities Fund I, Roundshield raised above its target for Fund V, Hudson Cove announced a £200m target for its inaugural ABL fund, and PIMCO is targeting $4bn for its first ABL fund, with half raised from two investors.
Bank partnerships became a cornerstone of the market, allowing banks to de-risk while giving managers access to deal flow. Notable examples include Sixth Street's up-to-$4bn Affirm loan purchase program, PGIM's $500m inaugural purchase of Affirm asset-backed loans, Apollo's Atlas SP partnership with BNP Paribas with initial commitments of $5bn, and Ares's commitment of up to $1.5bn to prime vehicle leases from Certified Automotive Lease Corp. Carlyle and KKR jointly acquired a $10bn student loan portfolio from Discover Financial at above par, after a competing joint offer from Sixth Street, BlackRock and CPPIB. Macfarlanes notes that the trend continued into early 2025, citing the Northwestern Mutual mandate, Point72's expansion of its private credit ABF strategy, and Mesirow's acquisition of Bastion Management.
Macfarlanes contrasts North American and European adoption. Banks account for roughly 70% of lending in Europe versus about 20% in the US. According to the ECB, net SME loan rejections by European banks rose 16% in Q4 2023 and a further 7% in Q3 2024, with demand for SME loans up 3%, which the firm presents as an opportunity for European ABF growth.
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