Private credit has become one of the fastest-growing segments of alternative investing, but the category is increasingly extending beyond the middle-market corporate loans many investors associate with the asset class. Asset-based finance, or ABF, is gaining attention as managers seek opportunities to lend against pools of financial and hard assets that can generate recurring or contractual cash flows. KKR, for example, describes asset-based finance as a core component of its private credit platform and has introduced an income-focused KKR Asset-Based Finance Fund designed to provide investors access to the growing ABF market.
Unlike traditional direct lending, where repayment generally depends on the cash flow and creditworthiness of an operating company, asset-based finance is supported by identifiable assets or contractual payment streams. The opportunity set can include consumer and commercial finance, equipment, aircraft, real estate-related lending, transportation assets, receivables, and other specialty finance markets. Recent institutional interest underscores the category’s growth: the Privacore VPC Asset Backed Credit Fund recently received another $100 million from the General Electric Pension Trust, bringing its deployable seed capital above $350 million.
For advisors, the expansion of asset-based finance is a reminder that “private credit” is becoming an increasingly broad label. Two private credit funds may have very different risk drivers depending on whether they lend primarily to middle-market companies or finance diversified pools of underlying assets. Collateral quality, borrower concentration, duration, structure, leverage, and sensitivity to economic conditions can differ significantly. As private credit allocations grow within wealth portfolios, understanding what actually sits beneath the private credit label may be just as important as evaluating the asset class itself.
