AllianceBernstein: Asset-based finance ‘a burgeoning market yet to be tapped’
Asset-based finance is a “burgeoning market yet to be fully tapped” with a potential market that “dwarfs” the direct lending and liquid high-yield markets, according to AllianceBernstein.
In a new report on asset-based finance, the asset manager said this market “offers investors access to a growing opportunity set” that hasn’t yet been fully taken advantage of.
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“There’s more than $6.3tn (£4.7tn) in debt in the specialty finance ecosystem and more than twice that in the under-pressure banking system,” it said.
“That potential addressable market dwarfs the combined $3tn in the direct lending market and liquid high-yield markets.”
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“From what we see, this opportunity hasn’t yet been fully reflected in investors’ allocations,” it added, explaining that this is “probably because it’s a wide-ranging asset class and not all private lenders have the know-how to navigate it effectively.”
Investors who access the asset-based finance market could find attractive potential returns and diversification, the firm went on to say.
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“These investments offer a yield premium because they’re less liquid than similar public securities—and because lending arrangements can be complex. Along with healthy income, they also offer potential capital gains, because they’re often made at a discount.
“Asset-based finance may also complement investments in direct corporate lending and public-market risk assets such as corporate bonds and equities. We believe they bring a level of economic diversification that may help cushion portfolios in declining and turbulent markets.”
