Credit

Alternative Credit

Alternative credit, also known as asset-based finance (ABF), is a rapidly growing subsector of private credit focused on generating income from pools of asset-backed collateral. This market provides essential funding across the real economy, encompassing credit card receivables, installment loans, revenue-based financings and mission-critical equipment leasing.

As the private credit market continues to evolve, we believe asset-based finance (ABF) represents its next frontier. This multi-trillion-dollar market, which may be poised for significant growth in the coming years, provides essential funding across the real economy.

While ABF is a relatively new asset class for most investors, the underlying assets are some of the most mainstream forms of credit found across the economy and is connected to many aspects of every day life and provides vital funding that enables daily activities . Take the purchase of a t-shirt for example, ABF can finance (i) the credit card transaction, (ii) the small business loan to the clothing store, (iii) the equipment that produced the shirt, and (iv) even the trucks that transport the t-shirts to the store.

Learn more about asset-based finance and its underlying segments: financial assets and hard assets.

Asset-based finance

Asset-based finance (ABF) generates income from cash flows tied to pools of asset-backed collateral. While ABF falls within the broader private credit universe, it differs significantly from direct lending—the most familiar private credit strategy for many investors. ABF investments focus on the cash flows and residual value of collateral tied to specific assets and pools of assets. Although the underlying assets have value as collateral, the primary source of repayment comes from the predictable cash flows the assets can generate, such as credit card receivables or equipment lease payments.

As illustrated, we categorize the broader ABF investment universe in two main buckets:

Financial assets: Non-tangible assets that derive value from a contractual claim on their cashflows or ownership rights
Hard assets: Tangible assets that have intrinsic value

Branch 1:

Corporate Credit

Direct Lending

Branch 2:

Alternative credit

Asset-Based finance

Financial assets

Hard assets

Learn more about asset-based finance and its underlying segments: financial assets and hard assets.

Asset-based finance TAM

$11.2T

5.1 % CAGR

$14.4T

2023

2028E

We believe asset-based finance is a large and growing market and can present a multi-trillion dollar opportunity. The expected growth is driven largely by increased regulation and higher capital requirements that have curtailed traditional bank lending activity.

Despite this expansion, high barriers to entry persist due to the specialized underwriting expertise required for these highly structured and bespoke financings, creating potential advantages for established managers with sector-specific experience and existing infrastructure. Notably, there is only an estimate $450bn of dedicated fund AUM to address this $11tn+ market³.

Asset-based finance offers the following potential benefits:

Potential to provide a resilient income stream based on predictable cash flows generated by highly diversified pools of asset collateral.

All-weather downside protection via highly diversified collateral and fully amortizing assets that derisk investments over time.

May provide low correlation to other credit investments via a portfolio invested across asset types

With 19+ years of investing experience and recognition as Specialty Finance Lender of the Year by Private Debt Investor in three of the past four years⁵, we believe we are a market leader in asset-based finance with one of the longest and most consistent track records among peers.

$ 0 B

invested in Alternative Credit

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total investments

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active relationships with non-bank lenders

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opportunities sourced via direct relationships

We have a 19-year track record investing in asset-based finance which seeks to provide attractive risk-adjusted returns by focusing on income oriented investments.

We leverage a differentiated sourcing funnel highlighted by our active relationships with over 50 non-bank platforms – more than 70% of our historical investments have been sourced through these repeat partners.

Our award-winning⁵ 65+ person investment team has expertise investing in hard and financial assets across various transaction structures and underlying credit types.

Our investment team, including our data science effort, has developed the requisite processes and infrastructure to effectively underwrite and manage investments through various market cycles.

Track record open icon

Track record

We have a 19-year track record investing in asset-based finance which seeks to provide attractive risk-adjusted returns by focusing on income oriented investments.

Sourcing

Tenured team open icon

Tenured team

Our award-winning⁵ 65+ person investment team has expertise investing in hard and financial assets across various transaction structures and underlying credit types.

Underwriting & monitoring open icon

Underwriting & monitoring

Our investment team, including our data science effort, has developed the requisite processes and infrastructure to effectively underwrite and manage investments through various market cycles.

Unless otherwise noted the Report Date referenced herein is as of December 31, 2024.

Endnotes

For illustrative purposes only. The information shown is summary in nature and not complete.
References to “downside protection” or similar language are not guarantees against loss of investment capital or value.
Source: National Bureau of Economic Research, “The Secular Decline of Bank Balance Sheet Lending”, October 2024.
Blue Owl acquired the Alternative Credit strategy from Atalaya Capital Management in September 2024.
Blue Owl Alternative Credit was ranked by Private Debt Investor as the “2024 Specialty Finance Lender of the Year, Americas”. Private Debt Investor ("PDI") is an independent organization that is not affiliated with Blue Owl Alternative Credit (fka Atalaya Capital Management). PDI's selection process involved an initial fee-free application where managers were nominated for award categories and subsequently subject to an online reader poll that prompts readers to vote for a particular firm in one or more of multiple enumerated categories, including Lender of the Year. The nomination criteria are inherently subjective and account for a mixture of qualitative and quantitative criteria, including non-financial considerations. Blue Owl Alternative Credit has provided compensation to Private Debt Investor in connection with sponsorship in other publications but not in connection with the consideration for or receipt of these awards. Award recipients were announced by PDI in March of 2025. Blue Owl Alternative Credit is unaware of any factor that could call into question the validity of its selection as PDI's 2024 Lender of the Year, and the award is not indication of Blue Owl Alternative Credit’s future performance. There can be no assurance that another organization or different sampling process would achieve similar results.

Important information

As with any investment, investors should be aware of the associated risks, including the potential for defaults, illiquidity, and market volatility. While asset-based financing may offer features such as downside protection and stable income, these are not guaranteed and may be impacted by underlying asset performance, borrower defaults, and macroeconomic conditions. It is crucial for investors to assess their risk tolerance and investment objectives carefully before committing capital to ABF investments.

Alternative Credit

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Understanding alternative credit

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