Recent years have seen some of the world’s largest private equity players expanding into private credit. Several North American private equity giants are now running private debt platforms exceeding the AuMs of their traditional private equity franchise.
The private credit market, however, has grown not only in size but also in terms of breadth. The focus is increasingly shifting, from debt funds that pool investors funding into pure corporate credit, to lending through diverse asset-based finance (ABF) solutions.
Some market studies suggest that the ABF market is expected to top USD 9 trillion by 2029[1]. The total addressable market is estimated to be over USD 20 trillion[2]. While organisations like Moody’s hold a more cautious view, they corroborate the shift from corporate lending to the ABF market[3]. Undeniably, this shift is creating new opportunities for alternative lenders.
Asset-based finance: a quick guide
ABF broadly refers to lending that is secured against physical assets or pools of assets. ABF is first supported by the contractual cash flows generated by them, and then by the liquidation value of those assets. This is in contrast with direct corporate lending which relies on the borrower’s own creditworthiness.
ABF provides critical funding to the real economy. It spans consumer-focused credit: auto loans, student loans, personal loans and non-consumer loans, as well as business-related activity: aviation finance, royalty streams, equipment leasing, and mortgages including home improvement loans.
Asset-based finance’s resurgence: diversification and flexibility
Private credit managers entering the ABF space believe it provides an interesting value proposition for investors across economic cycles, as credit performance is less correlated to traditional corporate credit. It allows GPs to structure diversified investment opportunities that meet the risk-return needs and preferences of investors. As ABF creditworthiness derives from the cashflow of the pool of underlying assets and their collateral value, ABF can provide varied investment profile exposure.
Private ABF deals also further increase portfolio diversification as they are considered to be low-correlated to private credit strategies. ABF loans can be paid back more quickly since they set payback amortisation schedules as part of their terms. As a result, portfolio managers have improved visibility on whether and when the assets will be repaid.
Additionally, borrowers are prone to pay more for certainty, speed of execution and the financing flexibility that some ABF lenders can provide.
Private financing can offer yield premium thanks to customisation, certainty and scale. In the case of self-originated ABF assets, it provides investors and other deal participants with the ability to customise the structure, control asset quality and benefit from lower credit volatility.
Asset-based finance reaches European shores: why now?
ABF has historically been a central strategy of US managers, but we are now seeing more uptake in Europe. Increasing banking regulation in Europe and balance sheet optimisation has caused bank lenders to retract from certain areas of traditional lending or non-corporate credit profiles. Some borrower types are no longer covered by bank lenders, which has created space for specialty finance asset managers. With technological developments facilitating the underwriting process, more non-bank lending platforms are coming to the market seeking financing. We see this burgeoning interest through several high-profile fund launches in recent years:
- Blackstone launched their asset-based credit (ABC) platform in 2023, combining the ABF and insurance groups into a single unit. In 2024, they partnered with several banks to acquire multiple loan portfolios. In 2025, Blackstone launched an ABF fund BLACKSTONE ABF ICAV.
- In 2024, Apollo’s Atlas SP partnered with BNP Paribas to support asset-backed credit originated by Apollo and Atlas with an initial commitment of USD 5 billion. In 2026, Apollo launched a Luxembourg-domiciled dedicated ABF fund.
Launching ABF products in Europe: factors for success
For US GPs, implementing an ABF strategy in Europe is not a simple ‘copy-and-paste’ exercise.
Based on our experience supporting major private credit managers with their ABF fund launches, GPs need to focus on these areas to successfully navigate the local environment:
- European regulatory requirements: US GPs might consider implementing the same strategy in Europe as those they have successfully launched in the US, using their US or UK-based implementation teams. However, they must be prepared for a plethora of regional regulations as well as the distinct roles of European market intermediaries and service infrastructure. For example, GPs need to consider, as part of their deal and fund structuring, the differences between the role of US custodians and European depositaries under AIFMD, and their so-called look-through requirements. A multi-local depositary provider who understands the different requirements in the US and in Europe can provide GPs with the necessary support to bridge this gap.
- Navigating local ecosystems and asset class specifics: US GPs need to find a common language with service providers in Europe when it comes to fund management and administration processes. In addition, understanding the specifics of the ABF investment strategy and instrument types can ease operational set up and day-to-day business with administrators and any other service providers. For diversified ABF portfolios that combine liquid and illiquid expertise, it’s important for service providers to have connectivity with pricing data vendors for liquid instruments as well as to the client’s independent data source for illiquid assets valuation.
- Educating existing investor bases: GPs replicating an ABF strategy in Europe must consider how to bring in their existing US investor base, in addition to a new European investor base. US investors will need to understand how the AML/KYC process applied in the US through Luxembourgish structures works, and how to navigate these specific European requirements. GPs should not underestimate this process and start discussions on the expected onboarding requirements early on.
Choosing the right partner
Choosing the right partner in Europe can help guide private credit managers on the European regulatory environment, in addition to cooperation with their local AIFMs. Tight cooperation, especially during the structuring phase and definition of the investment strategy, can facilitate look-through assessment for the desired fund products and investment portfolio.
In Europe, ABF funds are sold only to professional investors. Nonetheless, GPs looking for liquidity solutions for their LPs may choose to set up semi-liquid ABF funds. In these cases, a servicing partner needs to be able to support GPs throughout the lifecycle of the funds. They must be able to manage subscription and redemption processes, while also managing cash upstream and downstream via a multi-layer investment structure often used in European private funds.
At BNP Paribas’s Securities Services business, we have a wealth of experience in supporting GPs exploring the ABF universe. As the world’s leading banking partner to the private markets, our range of financing, custody, loan administration and reporting solutions offer full end-to-end support for private credit managers setting up or expanding in Europe.
[1] Asset-backed finance is growing fast and drawing new scrutiny