In this short Q&A, Albane Poulin, Head of Private Credit at Gravis, gives an overview of asset-backed finance, discussing its history, Gravis’s expertise in the sector, and what you need to consider before investing.
What is asset-backed finance?
Asset-backed finance (ABF) refers to a form of financing where loans or credit have specific assets as collateral.
Traditional asset-backed finance is typically secured by tangible assets like property, vehicles, aircraft, shipping vessels, equipment, and infrastructure such as wind turbines, solar panels, or other physical installations.
Another category includes financial assets such as receivables (e.g., football financing), inventory, or consumer loans (like student loans).
This differs from corporate direct lending, where financing is based on the overall creditworthiness of a company without tying it to specific assets.
How long has asset-backed finance been around?
While public asset-backed securities have been around for decades, private ABF has expanded significantly since the 2008 Global Financial Crisis. In response to tighter banking regulations and capital constraints, traditional lenders pulled back, creating opportunities for alternative financing providers to support asset-rich borrowers through private ABF solutions.
What areas of asset-backed finance does Gravis specialise in?
At Gravis, our focus is on "hard" assets, particularly infrastructure and real estate. We believe these sectors are more widely recognised, better understood, and offer greater investment clarity.
The core advantage of asset-backed finance lies in the presence of strong collateral, which enhances visibility on recovery value if a deal doesn’t perform as expected. The use of well-understood and widely accepted assets as collateral improves loan liquidity and facilitates asset liquidation when necessary.
What do investors need to think about in terms of the risk profile of asset-backed financing?
As some of the assets can be quite niche - for example, inventories, aircraft or specialised machinery - it can be hard to value and this reduces the liquidity of the collateral.
Is asset-backed financing becoming a core holding for some investors?
Asset-backed financing is increasingly becoming a core component of private credit portfolios, as it offers more stable and predictable cash flows. Investors expanding their presence into private markets are drawn to this asset class for its potential to enhance portfolio diversification while generating consistent yield.
However, investing effectively in this space requires access to specialised resources, expertise in structuring and valuation, and deep sector knowledge.
What is your outlook for asset-backed financing?
The outlook for this asset class remains positive, particularly in light of ongoing macroeconomic uncertainty. In such an environment, investors could be better served by focusing on secured lending (where loans are backed by solid collateral) rather than relying on projections of future cash flows tied to unpredictable economic scenarios.
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