Asset-Based Finance: Redefining the Private Credit Landscape

Asset-Based Finance at PIMCO

In a fast-evolving private-credit universe, asset-based finance (ABF), also referred to as asset-backed finance, asset-based lending, or specialty finance, is a $20T+ market that can provide a differentiated source of risk-adjusted return potential for investors.

We define asset-based finance as any lending outside of the traditional corporate and commercial real estate markets. Often secured by hard assets as collateral, it provides crucial funding across the global economy through residential mortgage credit, consumer credit, and non-consumer lending.

PIMCO's ABF platform seeks to offer a diverse range of opportunities through originating, structuring, and asset-managing investments across market cycles, with a focus on lending against and investing in income-generating assets.

15+ Years of Consistent Team Leadership

45+ Investment Team Members

60+ Relationships with Originators

All data as of 31 December 2024. Source: PIMCO.

^* Represents all specialty finance investments in PIMCO private funds and an aggregate of Private Fund-of-One SMAs. Specialty finance assets include loans and other cash flowing assets across three main verticals: Consumer, Non-Consumer (excluding traditional real estate and corporate-related assets), and Portfolio Solutions; also includes equity investments in companies directly involved in servicing or originating these assets.

Asset-Based Finance Explained

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Our Edge in ABF

Ability to Assess Relative Value

PIMCO's presence across private ABF and structured credit, with $455B+ currently under management, enables our investment team to evaluate opportunities with a relative value lens.

Proprietary Data and Analytics

Our granular underwriting is built on proprietary models and and billions of data points gathered over 20+ years of investing in these markets.

Comprehensive Sourcing Capabilities

With deep relationships with both originators and bank leadership teams, PIMCO can serve as a one-stop shop for sellers given our ability to take on risk across the liquidity spectrum.

Financing and Structuring Expertise

As one of the largest lenders and borrowers globally, PIMCO is an experienced partner in structuring and securitization and may have access to favorable financing terms.

As of December 2024. Source: PIMCO.

Potential Benefits of ABF

Income Generation

ABF investments may generate resilient current income and steady repayments through contractual cash flows.

Diversification

Investors may gain diversification to traditional forms of private credit through exposure to ABF's varied sectors and granular asset pools.

Downside Mitigation

We focus on detailed asset underwriting and creating resilient structures with the goal of generating attractive risk-adjusted returns.

More to Know

Investment Strategies

Asset-Based Finance Offers a Strategic Edge in Uncertain Markets

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Navigating the Private Credit Landscape: Insights and Opportunities

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Asset-Based Lending: Common Myths and Misconceptions Busted

ABL is often misunderstood; we dispel common myths that may be holding investors back from exploring the asset class.

The Why and How of Allocating to Asset-Based Lending

Why is asset-based lending considered the next frontier of private credit, and how does it fit within a broader allocation? Kyle McCarthy, private credit specialist, explains.

PIMCO's Highest Conviction Themes in Asset-Based Lending

Consumer lending, aviation finance, and digital infrastructure: learn more about these exciting sectors in asset-based lending from private credit specialist Kyle McCarthy.

Asset-Based Lending Provides Diversification to Private Credit

Higher interest rates and increased regulatory pressures have challenged traditional lenders, creating opportunities in private asset-based specialty finance markets.

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Actionable Alternatives: Synthetic Risk Transfer (SRT)

In this series, discover exciting private market opportunities and examples of how PIMCO pursues them to benefit our investors.

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Frequently Asked Questions

Asset-based finance is a sector where PIMCO has established a strong presence, being one of the earlier entrants into private asset-based markets post-Global Financial Crisis (GFC). Leveraging our fixed income DNA, detailed loan-level underwriting and robust data analytics, we have become one of the largest investors in the space. As a prominent liquidity provider and strategic partner to global banks, we navigate complex regulatory environments and offer alternative credit solutions. Our size and scale enable us to purse favorable loan terms and access stable financing solutions that are not subject to daily market-price fluctuations.

Asset-based finance, asset-based lending, asset-backed finance, and specialty finance are interchangeable terms that all refer to lending that occurs outside traditional corporate and commercial real estate markets and is secured by financial or hard assets.

Asset-based lending investments can be categorized into 3 main types: consumer-related debt (e.g. student loans, auto loans, personal loans); non-consumer assets (e.g. aviation finance, data infrastructure, equipment leasing); and mortgages (e.g. U.S. residential mortgages, European mortgages, home improvement loans).

Many investors have allocated heavily to corporate direct lending in recent years. Adding asset-backed financing may be an attractive complement and diversifier, with the potential to increase returns and reduce volatility within a private credit allocation. This is driven by a borrower base, economic risk factors, and contractual cash flows that are all differentiating versus corporate direct lending. A backdrop of tighter regulations also creates an attractive entry point as banks pull back and barriers-to-entry are high. This is a key area of strength for PIMCO given asset-based lending's close ties with fixed income.

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