Once considered a niche or opportunistic allocation, asset‑based finance (ABF) is increasingly moving into the core of private credit portfolios. At SuperReturn Private Credit Europe, Melissa Bockelmann, Head of Private Debt Investment Specialists, Aviva Investors, and Missy Dolski, Partner and Global Head of Asset-Based Finance, Värde Partners, explained why LP interest is accelerating - and why experience matters more than ever in this complex corner of the market.
Where ABL fits: Diversification, downside, and complexity
Melissa sees LPs shifting beyond core direct lending: “Much of it is diversification… not just geographically, but across asset classes.” Her team’s study found 37% of investors are still not allocated to asset‑based finance — despite a trillion‑scale market opportunity. Why ABL belongs in the toolkit:
• Contractual cash flows anchor risk/return.
• Single‑issuer risk is reduced; exposure is diverse across sectors.
• You can engineer protections through structure.
“It’s a great diversifier… but the complexity premium isn’t free.” The catch, and the opportunity, is complexity:
• ABL underwriting adds servicer and originator operational risk to classic borrower/credit risk.
• It’s labour‑intensive and easy to overlook if mandates are too narrow.
• Downside protection is earned via bespoke structuring and diligence discipline.
Flexibility beats fashion
For Melissa, the real edge is a flexible mandate: Some areas (e.g., supply chain finance) can be attractive at times and unattractive at others. Walk away when the return per unit of risk degrades. Avoid getting locked into narrow themes (music royalties, NAV lending) if you can’t pivot.
"Don’t cut corners on due diligence, and be ready to walk away.”
From stressed assets to performing credit
Missy Dolski outlined how ABF has evolved at Värde over three decades. Having invested more than $13bn since 2008, the firm has shifted from distressed strategies toward performing middle‑market credit.
Värde focuses on:
• €50–150m ticket sizes
• Consumer finance, commercial finance, and fund finance
• Relationship‑driven, solutions‑oriented lending
Once deals reach very large sizes, returns tend to become pricing‑driven. The middle market, by contrast, rewards deep expertise and structuring skill.
Where opportunity sits today
Opportunities remain broad but nuanced:
• Consumer finance: auto lending, credit cards, and selective consumer exposure
• Commercial finance: SME lending, equipment leasing, and platform financing
• Fund finance: subscription lines, NAV lending, and GP commitment facilities
LPs seeking diversification are increasingly active across all three.
Complexity is the point
Both speakers stressed that ABF is easy to underestimate. Effective underwriting requires:
• Understanding operational and servicer risk
• Monitoring asset‑specific KPIs
• Preventing and detecting fraud early
• Tight collateral and custodial controls
“This is not a space you can just enter,” Missy noted. “You have to know the people and the platforms.”
What this means for LPs
Asset‑based finance is no longer complementary; it is becoming a standalone allocation within private credit. But success depends on selecting managers with operating experience, flexible mandates and the discipline to walk away.
