Navigating the Asset-Based Finance Frontier
Navigating the ABF Frontier
The Asset-Based Finance (ABF) market is like an expedition into uncharted territory, where success is not just about having a road map, it’s about understanding the terrain, knowing which paths to take, and spotting hidden opportunities in today’s growing $6 trillion market. In private ABF, it takes more than knowledge; it requires a sharp eye for opportunity and the ability to create your own origination while navigating complex landscapes shaping this market.
At the heart of it all is origination—the guiding compass that unlocks untapped potential and alpha. While other parts of the private credit market, such as direct lending, have become well-traveled paths with increasing liquidity, ABF remains one of the last true frontiers of private credit— a market where bespoke, unique deals are waiting to be discovered by those who expertly navigate the terrain. This is no ordinary origination process; in ABF risk and reward are balanced by experience, insight, and flexibility.
Enter private ABF: a market growing faster than the capital that can attend to it, creating a rush of opportunity for those bold enough to explore. As banks continue to pull back, rationalizing their capital through loan sales and synthetic risk transfers, financial companies are sharpening their tools, reducing balance sheets in favor of better return on equity metrics. Technological innovation and industry evolution have uncovered new ABF sectors and products, creating a dynamic, fast-moving market. Yet despite this evolution, ABF remains a true private market, shaped by the unique partnerships formed through direct relationships and multi-faceted, dynamic managers.
Proactive Origination: The Compass for Success
Just as explorers need to know more than just their destination on a map, ABF market participants must understand the structure and history of this market. Originally dominated by traditional banks, the ABF landscape was shaped by capital flexibility and creative structuring, with strategies such as portfolio purchases, mezzanine loans, and platform lending. Today, institutional participants continue to build on this legacy, finding new ways to navigate and structure deals.
The non-corporate collateral of the ABF landscape is broad, from portfolios of automobile loans and credit card receivables to music royalties, aircraft, and railcars. This complexity and variety mean that each deal is a one-of-a-kind process, requiring lenders to assess each opportunity with precision and chart a unique course for each transaction.
Charting Our Own Course: Proprietary Platforms
In ABF, proprietary platforms allow us to control our journey by securing exclusive relationships or managing the lending entity, enabling us to direct deals and shape long-term strategic value. Much like skilled explorers, we use these platforms to guide the flow of deals and direct the long-term strategy of the businesses we partner with.
Our partnership with Activate, an Irish real estate development platform, is a prime example of how we direct our path in the ABF market. By tapping into our market expertise and partnering with a local subject matter expert, we were able to navigate the complexities of the Irish housing market and proactively create a platform that has financed over 20,000 housing units since its inception. This approach gives us the strategic direction and long-term control that is critical in this ever-shifting market.
Expertise: The Map to Exclusive Opportunities
Industry expertise in ABF is like having an experienced trail guide that knows about exclusive deals that others may miss. Through our ABF team and the broader KKR network, we have developed the connections that allow us to access niche sectors and structured deals that are often unavailable to the broader market.
Our work in music intellectual property illustrates the power of these proprietary relationships. We created Chord Music Partners, a platform focused on acquiring music IP catalogs, through long-established industry ties. This platform, seeded by purchasing a majority stake in the catalog of Ryan Tedder, grew to over $1.7 billion in music assets. By leveraging our strategy expertise, we have been able to successfully navigate a highly specialized sector, creating value where others might have never seen the opportunity to begin with.
Our landmark recreational vehicle (RV) transaction, where we purchased BMO Bank National Association’s $7.2 billion portfolio of seasoned super-prime RV loans, is another good example. This transaction set a precedent in the market, demonstrating our thematic approach to ABF investing by targeting high-quality, secured assets and stepping in as a capital provider to traditional banks seeking liquidity. These types of assets were once tightly held by banks, but as banks strategically reposition, we have seen a replicable framework emerge.
Repeat Business: The Proven Path
In any journey, building trust with your partners is essential, and in ABF, trust is exemplified through repeat business. More than a quarter of our transaction volume stems from long-term relationships with borrowers who continue to work with us because of the trust we’ve cultivated and the tailored solutions we provide to meet their specific needs.
Our captive customer base is represented by KKR’s $61 billion ABF platform. With a large, highly diversified portfolio and a global team of content experts, we are uniquely positioned to identify compelling relative value across both high-grade and opportunistic risk spectrums.
One standout example of this trust is our partnership with Global Lending Services, one of the largest non-bank auto lenders in the U.S. Since the start of our commercial relationship in 2019, we have renewed our engagement multiple times, most recently in the summer of 2024. Over the years, we’ve built a strong rapport with the management team, earning their trust through our close support, especially during volatile periods like the pandemic and the subsequent inflationary shocks. These successive years of collaboration have allowed us to develop a comprehensive repository of loan performance data across varying market conditions—critical for effective due diligence.
Our partners return to us, knowing we have the deep subject matter expertise to handle such complex transactions—reinforcing trust and fostering repeat business.
The Final Frontier
In the expansive world of private credit, ABF remains one of the last unexplored frontiers—where no centralized database or exchange of investment opportunities exists. Yet, experienced navigators can still manufacture alpha by charting their own course. Whether through proprietary platforms, leveraging long-term relationships, or securing repeat business, origination in ABF is not created equally. Success depends on partnering with a manager who is not only experienced and tenured but also scaled, with the ability to navigate across capital structures and sectors globally. In a landscape where many markets are well-traveled, ABF presents a compelling opportunity for those bold enough to venture off the beaten path.
