BlackRock sees opportunity for private credit in asset-based financing
Private credit lenders can play an increased role in asset-based financing (ABF), potentially filling ‘financing gaps’ as banks become more selective in their lending, according to BlackRock analysis.
The world’s largest asset manager, which had assets of $10.5tn (£8.2tn) as of the first quarter of this year, said that private debt can be defined as any financing that is originated, structured, and then held directly by the lender.
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It sees this activity – which encompasses lending related to consumer debt, hard assets, commercial financing and intellectual property, among other categories – as ABF.
ABF is estimated to be a $5.5tn market in the US. Around a third of this market is financed by non-bank lenders, according to Oliver Wyman data cited by BlackRock, with the private credit industry’s current market share estimated to be $200-$300bn.
“While the concept of diversification away from the bank lending channel is not new, over the past several months, market participants have focused on the potential for private credit lenders to play an increased role in ABF, potentially filling ‘financing gaps’ from some banks’ more selective appetite to lend (as they may look to optimize the capital efficiency of their balance sheets),” BlackRock’s analysis said, which was authored by Amanda Lynam, head of macro credit research, portfolio management group – private markets and Dominique Bly, macro credit research strategist – portfolio management group, private markets.
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“Indeed, recent news flow over the past several months has pointed to increased participation of non-bank lenders in this area, either through some banks’ sales of loan exposures, or defined origination/lending partnerships between bank and non-bank lenders.”
BlackRock noted structural shifts behind its growth, including “the degree of restriction in bank lending” and the variation in economies’ bank lending reliance across regions.
It also highlighted the growing appetite for ABF investments from US insurers.
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