Credit | Investment Insight
May 24, 2023
Multi-Asset Credit: The Asset-Backed Finance Allocation
Joe Moroney | Partner, Yield Multi-Credit Lead
Robert Bittencourt | Partner, Co-Head of Opportunistic Credit
Akila Grewal | Partner, Head of Credit and FIG Product
The securitization market has evolved since its birth in the 70s, with its latest transformation offering the potential for increased diversification, yield enhancement and downside protection for Multi-Asset-Credit. Now ABF is being taken private by new entrants shaking up the established order to the benefit of semi-liquid portfolios.
Key Takeaways
- While many people may not realize it, the Asset-Backed Finance (ABF) market is part of our daily life and is a critical source of financing for small and medium sized companies.
- As banks have retrenched from the ABF market over the past decade, specialty lenders and private capital have filled the gap with innovative financing solutions.
- Today, the ABF market spans a broad range of sectors and industries that represent a diversified opportunity set in credit and one that is bigger than the US corporate fixed income market.
- An allocation to ABF may provide attractive benefits including portfolio diversification and yield enhancement as well as a possible hedge against inflation.
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Apollo believes Investment Grade Private has the potential to generate attractive risk-adjusted returns but has been overlooked because it doesn’t fit neatly into the current asset allocation framework.
Market participants often ask why large corporate borrowers would choose a private solution for financing rather than the public markets, especially in the current environment. In this paper, we answer that question and explore the lasting power of private credit, the landscape of the debt markets, potential opportunities, and pitfalls to avoid.
Equity | Investment Insight
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