Asset-backed finance is a way of diversifying private credit portfolios and picking up additional returns, according to Armen Panossian, co-chief executive and head of performing credit at Oaktree.
Speaking in the firm’s latest Insights podcast, Panossian said that private credit opportunities have evolved over the past 10 years, and the areas where you can get “additional return without taking on meaningful additional risk” are where you go into “more complex lending opportunity sets”, such as asset-backed finance.
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He said that the “complex world” of asset-backed finance presents opportunities for investors by opening up access to different industries.
“Asset-backed finance touches a variety of different industries, many of which do not have borrowers in the corporate direct lending market,” he said.
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“It exposes or creates an opportunity to invest in those industries that otherwise might not be available. For example, shipping finance. You really don’t see a shipping company with a meaningful amount of loans for example, or bonds, high-yield bonds, that you could buy in the market in a diverse way.
“But in the asset-backed area, you could choose to lend against a particular type of ship- ping vessel, a particular set of counter-parties or lessees of shipping vessels. It’s a way to add diversification to a private credit portfolio by adding asset-backed finance and picking up additional return.”
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