Finley Technologies, Inc. reposted this
Skate to Where the Puck is Going: Asset-Based Lending (ABL) allocations by institutional investors will rise dramatically over the coming decade as a huge percentage of the asset class shifts from banks and private markets. The little kid on the private lending block is all grown up now, as ABL is taking center stage with Direct Lending. A smart alpha strategy for capital allocators is to craft a portfolio of top performing managers across the Private Credit spectrum (Direct Lending, ABL, Opportunistic Credit) that can deliver strong, repeatable results. ABL is a $40T TAM, much larger in size than most imagine. Most portfolios are tied to corporate risk as the majority of portfolios are comprised of Public Equity market risk, Private Equity risk (LBO, Growth, VC) and Corporate Direct Lending. ABL offers diversification and low correlation to the equity markets. Pension plans, insurance companies and endowments/foundations and their consultants are cleverly re-evaluating their portfolios to build a more diversified, better insulated Private Credit portfolio, and part of this solution requires a greater allocation to ABL as this strategy has historically exhibited high absolute returns plus it has lower volatility when compared to the equity markets. Pension & Investment News just published a lead article of my interview covered by Lydia Tomkiw - I greatly enjoyed our engaging conversation:
Chris Loeffler
3mo
With interest rates where they are, many firms are going to favor the speed and certainty of execution of ABL focused firms over marginal cost savings from traditional lenders like regional banks.
Brian Grodin
3mo
Skate to where the puck is going is good timing with the NHL Stanley Cup finals on tonight-lol
Debt & Equity —> Investing & Advising
3moIt’ll be interesting to watch whether institutional margins erode more as portfolios expand their ABL capabilities. ABL is labor and reporting intensive - field examiners, back office support for regular reporting. If this area of the market sees as much margin compression as direct lending as new players enter the market, it will be interesting to see who can maintain decent profitability