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.

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Understanding alternative credit

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.

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The backbone of Main Street

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. 

 

Illustrative example: a trip down Main Street

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Understanding Alternative Credit

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
Private Credit
Branch 1:
Corporate Credit
Direct Lending
Branch 2:
Alternative credit
Asset-Based finance
Financial assets
Hard assets

Understanding Alternative Credit

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

Asset-based finance TAM

$11.2T
5.1 % CAGR
$11.2T
2023
2028E

A growing opportunity set

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.

Reasons to Consider Alternative Credit

Asset-based finance offers the following potential benefits:

Consistent income

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

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Potential downside protection

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

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Diversification & low correlation

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

Blue Owl Alternative Credit Platform 4

With more than 19 years of investing experience, we believe that we are a market leader in asset-based finance with one of the longest and most consistent track records amongst peers
$ 0 B
invested in Alternative Credit
900+
total investments
0 +
active relationships with non-bank lenders
0 %+
opportunities sourced via direct relationships

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.

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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.

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Sourcing

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.

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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. 

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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.

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Reach out to member of our Private Wealth team today.
Individual investors, please contact your financial advisor for more information.

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

Endnotes

1. For illustrative purposes only. The information shown is summary in nature and not complete.

2. References to “downside protection” or similar language are not guarantees against loss of investment capital or value.

3. Source: National Bureau of Economic Research, “The Secular Decline of Bank Balance Sheet Lending”, October 2024.

4. Blue Owl acquired the Alternative Credit strategy from Atalaya Capital Management in September 2024.

5. 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.