The Advantages of Niche Asset-Based Specialty Finance

In the latest issue of Private Debt Investor, Northleaf's David Ross, Head of Private Credit, discusses the advantages of of niche asset-based specialty finance investments.

Asset-based specialty finance (ABSF) is a large segment of the financial market that covers effectively every aspect of the economy. ABSF asset classes range from car and consumer loans to residential or commercial mortgages, royalties for music or pharmaceutical assets, and other financial assets that can be used as security for loans to generate liquidity. Most of these asset classes are among the oldest in the credit markets, and they are well covered by banks, large institutions and funds. The space is large and the structures are well understood. 

"At Northleaf, we are focused on some of the fastest growing and more specialized segments of ABSF, for example corporate litigation, music royalties, niche factoring platforms and healthcare receivables. These are distinctive segments of ABSF where banks and public markets are less active. These sub-verticals are typically less trafficked by other capital providers given the underlying assets are more unique. This means they require specialist skillsets for underwriting and are also more difficult to source. Each of these segments are also scalable, meaning there are several platforms for us to partner with on credit solutions. 

The other lens that we apply when selecting sub-verticals is that they have low or zero correlation to macro and market factors. That has been really compelling for our investors’ portfolios."

Learn more about Northleaf's perspective on asset-based specialty finance in the full article titled, “The advantages of niche asset-based speciality finance" in the Private Debt lnvestorJuly/August 2024 issue.