Asset-backed finance (ABF) forms part of the private credit universe, the defining characteristic of ABF investments is that they are secured (backed) by a pool of assets.
Asset-backed finance (ABF) forms part of the private credit universe. The defining characteristic of ABF investments is that they are secured (backed) by a pool of assets; the performance and total return on the investment are therefore primarily dependent on the cashflows generated by the asset pool, rather than external market factors that can create volatility in public markets such as stocks and bonds.
ABF should not be confused with its more widely known cousin the asset-backed security (ABS) which is typically a liquid, syndicated and publicly traded instrument. ABF investments by contrast tend to be less liquid, bilateral (one investor and one originator of the assets), and private, typically without a rating.
ABF investments aim to deliver a consistent, uncorrelated income, in addition to limiting downside since the regular repayment of the underlying assets naturally deleverages the portfolio and reduces credit risk over the life of the deal.
Typically, sub-investment grade securities will have a higher risk of default, and are generally considered to be more illiquid than investment grade securities
The fund has the ability to use derivatives, including but not limited to FX forwards, for hedging and EPM purposes only. This may magnify gains or losses
