From Companies to Cash Flows: Private Credit’s Rotation into Asset-Based Finance and What It Changes for Allocators, Advisors, and the Wealth Channel Across the Americas

The direction of private credit’s growth has changed, and the industry’s own practitioners are the ones saying so. In a survey of more than 380 global private credit professionals published in June, 83% expected assets under management to rise over the next twelve to eighteen months. Asked what would drive that growth, 66% named asset-based finance and specialty finance, ahead of fund finance at 60% and corporate direct lending at 56%. Nearly half of active firms said they intended to increase deployment into securitized products. Product formation tells the same story: in the first three quarters of 2025, specialty finance overtook direct lending as the most common strategy for new private credit fund launches, 84 against 71, lifting its share of launches from 23% in 2024 to 34% in 2025.

The sizing estimates are large enough to explain the enthusiasm. The broadest definitions of asset-based finance, covering lending secured by diversified pools of cash-flowing assets from residential and commercial mortgages to consumer loans and equipment finance, put the addressable market above $20 trillion. One widely cited forecast has the investable market growing from roughly $6.1 trillion in 2025 to about $9 trillion by 2029, which would make it larger than today’s syndicated loan, high yield, and direct lending markets combined. Private credit as a whole is expected to cross $2 trillion in assets this year and to approach $4 trillion by 2030.

The rotation is already visible in the wrappers the wealth channel actually uses. U.S. evergreen funds reached $607 billion across 567 vehicles at the end of March, and interval and tender-offer funds pursuing broad alternative credit strategies took in $12.3 billion of net flows over the twelve months to March 2026, roughly double the $6.3 billion that went to funds focused on direct lending. This paper examines why the capital is moving, what ‘asset-based’ does and does not mean for risk, where the diligence gap sits (ratings, marks, and recourse to collateral), and how the same shift is running its own course in the region, most visibly in Brazil’s receivables funds. The conclusion for the wealth channel is that asset-based finance is a genuine diversifier and a genuine complication at the same time: it substitutes aggregated consumer and commercial collateral risk for idiosyncratic corporate risk, and the diligence templates built for direct lending do not travel.

The Rotation in the Numbers

The cleanest read on where private credit is heading comes not from performance tables, which lag, but from where managers are pointing capital and where investors are sending money. On the manager side, the June survey cited above spans the full ‘private credit plus’ perimeter: direct lending, asset-based finance, fund finance, real estate, securitized products, infrastructure, and significant risk transfer. Corporate direct lending finished third among expected growth drivers, behind asset-based finance and fund finance. That is a notable result, because the respondents include the direct lending industry itself.

Fund formation confirms it. Specialty finance strategies accounted for 34% of new private credit fund launches in 2025, up from 23% the prior year, and in the first three quarters overtook direct lending in absolute count. Managers do not launch funds into strategies where they expect to struggle raising capital, so launch counts function as a reasonable leading indicator of where allocator appetite is heading.

Investor flows agree, including in the retail-facing structures. U.S. evergreen private markets funds grew to $607 billion across 567 funds as of March 31, 2026, from $590.8 billion across 552 funds a year earlier, after a record year for launches. Within registered credit wrappers, the split is instructive: $12.3 billion of net flows into interval and tender-offer funds pursuing broad alternative credit against $6.3 billion into direct-lending-focused funds over the same twelve months. Broad, collateral-inclusive credit is outselling narrow corporate lending by roughly two to one in precisely the vehicles the wealth channel puts on its shelf.

Two caveats keep that figure honest. Those are flows, not stock: direct lending remains by a wide margin the larger installed base inside evergreen credit, so this describes direction of travel rather than present size. And ‘alternative credit’ is a taxonomy bucket that includes structured and opportunistic strategies alongside asset-based ones, so it is a proxy for the rotation rather than a clean measure of it. The survey evidence carries the same qualification: respondents select multiple growth drivers, and a ten-point spread between asset-based finance and direct lending is a shift in emphasis, not a repudiation. What survives the caveats is the direction, which every independent data series points the same way.

Context matters for interpreting all of this. The rotation coincided with a genuinely difficult year for the corporate side of the asset class. Non-traded business development company redemptions exceeded fundraising for the first time on record in the spring. Roughly $14 billion of redemption requests remained unmet in early July. Second-quarter results reported last week showed managers reducing leverage, containing non-accruals, and steadying loan performance, which is stabilization rather than recovery, and which arrived alongside continued pressure on valuations and subdued new origination. Capital that wanted credit exposure did not leave the asset class. It changed seats.

Why the Capital Is Moving

Four forces are driving the rotation, and none of them is a function of the rate cycle. The first is competitive. Sponsor-backed middle market direct lending attracted so much capital over the past decade that spreads compressed, documentation loosened, and differentiation between managers narrowed to a question of origination relationships. Asset-based finance is a younger, more fragmented, more structurally complex market, which means there is still room to earn a return for underwriting and structuring skill rather than for access alone.

The second is bank retrenchment, and it is the most durable of the four. Capital rules and balance sheet de-risking have pushed banks toward originating and distributing rather than originating and holding, with significant risk transfer transactions as one visible expression. Whole categories of collateral that banks once warehoused now need a non-bank home. This is a supply story rather than a demand story, which is why it does not reverse when policy rates fall.

The third is insurance capital, and it explains a great deal about product design. Annuity and life balance sheets need long-dated, rated, capital-efficient paper. Asset-based exposures can be pooled, tranched, and rated into instruments that fit those requirements in a way that a portfolio of unrated sponsor loans generally cannot. As insurance and alternatives balance sheets have converged, manager attention has followed the liability structures that can hold the product at scale.

The fourth is allocator diversification. Institutions and, increasingly, private wealth portfolios already hold substantial sponsor-backed corporate credit. A second credit sleeve whose cash flows are contractual, amortizing, and tied to collateral pools rather than to enterprise values is a legitimate answer to concentration in the same borrower universe. That is the honest case for asset-based finance, and it is a good one. The complication is what the diversification is diversifying into.

What ‘Asset-Based’ Does and Does Not Mean

The phrase is being asked to cover an enormous range. It encompasses investment grade aircraft and equipment leases with contracted lessees, senior tranches of prime residential mortgage pools, mid-market trade receivables, fintech consumer installment loans, and subprime consumer paper. Two funds carrying the same three-letter label can sit at opposite ends of that distribution. ‘Asset-based’ describes a financing technique, not a risk level.

What the technique genuinely delivers is worth stating clearly. Cash flows are contractual rather than discretionary. Exposure is spread across many small obligors instead of concentrated in one borrower. Structural protections such as overcollateralization, excess spread, and payment waterfalls sit between the investor and first losses. And the assets typically amortize, returning capital steadily rather than at a single bullet maturity. Compared with a unitranche loan to a single leveraged company, that is a materially different and often more attractive risk shape.

What it does not deliver is insulation from the macro. Diversification across ten thousand consumer obligors reduces idiosyncratic risk and increases sensitivity to the common factor: employment, wages, collateral values. When the household sector weakens, small exposures move together. That is not hypothetical in the current cycle. Subprime auto delinquencies of thirty days or more in securitized pools reached roughly 16% in late 2025, more than eight times the prime rate of about 1.9%, and consensus forecasts have subprime performance staying elevated through 2026 rather than normalizing. Across all auto balances, the share ninety or more days delinquent stood near 5.6% in the first quarter of 2026, up roughly 12% from a year earlier on Federal Reserve Bank of New York data. Collateral values compound the effect, because softer used vehicle prices reduce recovery on exactly the loans most likely to default.

That subprime figure is a tail statistic, and fairness requires saying so plainly. Most institutional asset-based portfolios sit well away from it, in senior tranches of prime collateral, in contracted equipment and aviation leases, or in short-duration receivables with meaningful overcollateralization. The point is not that the asset class is impaired. The point is that the distribution of outcomes inside a single label is unusually wide, and the label itself carries none of that information.

None of this argues against asset-based finance. It argues against treating the label as a risk assessment. The relevant question is never whether a strategy is asset-based. It is which assets, whose obligors, which cohort, and where in the capital structure.

The Diligence Gap: Ratings, Marks, and Recourse

Three specific gaps separate the diligence the wealth channel currently performs from the diligence asset-based finance requires. The first concerns ratings. Private ratings have proliferated alongside the market: the International Monetary Fund has documented roughly 7,000 private securities rated by specialized agencies in 2023 against about 2,000 in 2019, while each of the major agencies rated on the order of 1,000 a year. Concentration in insurance balance sheets is where this becomes concrete. Private letter ratings had reached roughly a fifth of the U.S. life industry’s fixed income holdings by the end of 2025, up from about 18% a year earlier, and rating agency work indicates the share is far higher among Level 3 assets, the least liquid holdings, valued using models built on internal assumptions. A regulatory inquiry into one ratings provider this year has put the integrity of private credit ratings squarely in view. A rating from a specialized provider is information. It is not a substitute for looking at the collateral tape.

The second gap concerns marks. Valuation opacity was the central theme of the Financial Stability Board’s report on private credit vulnerabilities published on May 6, alongside bank interlinkages, borrower credit quality, concentration, layered leverage, liquidity, and the supervisory data gaps that make the market difficult to monitor at all. The FSB’s response was to propose an initial set of core metrics that authorities should track comparably across jurisdictions, an implicit acknowledgment that today’s reporting does not permit a system-level view. In the same period, litigation has been filed against several credit vehicles alleging misstated net asset values and delayed recognition of losses, and public officials have commented on divergent valuation practices across private portfolios. In asset-based finance the valuation problem is harder rather than easier, because the analyst is marking a pool, a servicer’s behavior, and a waterfall rather than a single loan.

The third gap is the most practical and the least discussed: recourse. Does the fund hold perfected, bankruptcy-remote recourse to the collateral pool through a special purpose vehicle with a genuine lockbox on cash flows, or does it hold a claim against an originator that may have pledged the same receivables elsewhere? Double-pledging is the characteristic failure mode of the asset class, and the remedy is structural rather than analytical. Where those protections are absent, a lender’s recovery becomes a multi-year litigation question rather than a collateral question. This belongs on the front page of the diligence file, not in the legal appendix.

The View from the Americas: Brazil’s Receivables Boom and the Offshore Shelf

Asset-based finance is not a North American phenomenon that the region will import later. In Brazil it is already the fastest-growing local credit format, under a domestic name. Receivables funds, the FIDCs, drew the largest monthly net inflow of any Brazilian fund category in April 2026, roughly R$4.5 billion, or about $885 million, taking net inflows for the year to approximately R$12.1 billion, close to $2.4 billion. Investors facing high policy rates have gravitated toward instruments backed by identifiable cash flows rather than pooled corporate exposure, and securitization instruments, receivables funds included, accounted for roughly 30% of Brazilian capital markets issuance in the April 2025 reading, the most recent comparable monthly figure published by the local industry association. Construction firms and mid-market companies underserved by slow bank credit are financing themselves through receivables. The direction of travel, disintermediation of the banking system by collateral-backed capital markets funding, is precisely the global pattern running on a local track.

One detail deserves more attention from the region’s wealth industry than it has received. Since October 2024, FIDCs are no longer restricted to qualified and professional investors. Retail access is conditional rather than open, generally limited to senior classes, eligible receivables, and registered offerings, but the door is no longer closed. Brazil, in other words, has been running its own version of the retailization experiment that the United States is conducting through interval funds, with local documentation, local disclosure conventions, and a domestic retail investor base whose familiarity with structured credit is uneven. The questions being asked in Washington about suitability, liquidity language, and look-through disclosure apply with equal force in Sao Paulo.

For the U.S. offshore channel, asset-based exposure is arriving through the same conduits that carried direct lending: offshore feeders and Luxembourg-domiciled evergreen vehicles distributed through the platforms that serve private banks and independent advisors. The practical consequence is that an advisor in Miami, Montevideo, Mexico City, or Sao Paulo will increasingly see two products side by side, both described as private credit, with materially different collateral, liquidity, and correlation profiles. Two complications are specific to the offshore book. Currency is the first: collateral pools may be denominated locally while the client reports in dollars, and hedging cost is a real component of net return that is easy to underweight in a pitch. Jurisdiction is the second: recourse to a receivable is only as strong as the enforcement regime where the obligor sits, so a pool of local receivables and a pool of U.S. prime auto loans do not carry equivalent structural certainty even at an equivalent rating.

There is also a manufacturing opportunity that the region has underexploited. Latin America originates genuine asset-based collateral in volume: trade and export receivables, equipment leases, payroll-deductible consumer lending, agricultural receivables, and a growing pipeline of contracted energy revenues. The binding constraint has never been origination. It has been structuring capacity, servicing data of institutional quality, and neutral infrastructure capable of moving these assets to international investors in a form they can actually underwrite. That is an infrastructure problem before it is a product problem, and the platforms and fintech infrastructure providers that solve it will determine how much of this collateral reaches global capital at all.

What This Means for Managers, Advisors, and the Wealth Channel

For asset managers, the growth is in asset-based finance and so is the operational burden. Direct lending is fundamentally a relationship and negotiation business. Asset-based finance is a data business: underwriting a pool requires loan-level tapes, multi-cycle servicing history, cohort-level performance analysis, and systems that monitor triggers and covenants continuously rather than quarterly. Firms that built for sponsor dialogue do not automatically possess that capability, and the distance between a manager with genuine asset-based infrastructure and a manager with an asset-based strategy document is large, consequential, and close to invisible in marketing materials. For mid-sized managers in particular, the choice is to build the capability properly or to stay in the strategies they can actually underwrite.

For advisors, private banks, and broker-dealers, the diligence file needs a new page. What is the collateral, cohort by cohort, and what is the vintage distribution? Who services it, and what happens on servicer failure? Is recourse structural, perfected, and bankruptcy-remote? Who assigned the rating, and under what methodology? How is the pool marked, how often, and by whom? And how does the collateral’s amortization profile line up against the vehicle’s redemption terms? That final question links this rotation directly to the year’s liquidity lesson. Amortizing collateral is a real liquidity advantage over bullet-maturity corporate loans, but only where the vehicle’s terms are designed to pass those cash flows through to investors rather than to reinvest them automatically. Read the reinvestment language, not the marketing page.

For the wealth channel across the Americas, the honest summary is that both things are true. Adding collateral-backed credit to a book heavy in sponsor-backed corporate lending is a real improvement in portfolio construction, and the case for it is stronger than the case for most product innovations of the past three years. Doing it while continuing to treat ‘private credit’ as a single category is not. This year taught the industry that liquidity language required precision. The rotation now underway teaches a parallel lesson about collateral: the second engine of private credit runs on different fuel, it is being sold under the same name, and the professional obligation is to look through the label before the client is asked to trust it.

Sources

• Bloomberg. “Private Credit Funds Avert Worst Fears and Rebound From Lows.” August 6, 2026. https://www.bloomberg.com/news/articles/2026-08-06/private-credit-funds-avert-worst-fears-and-bounce-back-from-lows
• Private Equity Wire. “Private credit avoids worst-case scenario as BDC results point to stabilisation.” August 2026. https://www.privateequitywire.co.uk/private-credit-avoids-worst-case-scenario-as-bdc-results-point-to-stabilisation/
• Bloomberg. “Private Credit BDC Redemptions Surpass Fundraising for First Time on Record.” May 14, 2026. https://www.bloomberg.com/news/articles/2026-05-14/private-credit-bdc-redemptions-exceed-fundraising-for-first-time
• Bloomberg. “Private Credit Funds Trap $14 Billion as Redemption Requests Outpace Payouts.” July 2, 2026. https://www.bloomberg.com/news/articles/2026-07-02/private-credit-keeps-14-billion-trapped-in-bid-to-outlast-storm
• Alternative Credit Investor. “ABF and specialty finance to lead private credit growth.” June 4, 2026. https://alternativecreditinvestor.com/2026/06/04/abf-and-specialty-finance-to-lead-private-credit-growth/
• With Intelligence. “Private Credit Outlook 2026: Market Faces First Big Test.” 2026. https://www.withintelligence.com/insights/private-credit-outlook-2026/
• Apollo. “Asset-Backed Finance in 2026: Scale Demands Discipline.” 2026. https://www.apollo.com/institutional/insights-news/insights/outlook/2026/asset-backed-finance
• KKR. “The Expansion of Asset-Based Finance.” 2026. https://www.kkr.com/insights/asset-based-finance-fast-growing-frontier-private-credit
• PIMCO. “Private Credit: Asset-Based Finance Shines as Lending Landscape Evolves.” 2026. https://www.pimco.com/us/en/insights/private-credit-asset-based-finance-shines-as-lending-landscape-evolves
• Brookfield. “Private credit: Beyond direct lending.” 2026. https://www.brookfield.com/views-news/insights/private-credit-beyond-direct-lending
• Neuberger Berman. “Asset-Based Finance: An Introductory Guide.” 2026. https://www.nb.com/handlers/documents.ashx?id=1d8f9014-ff58-4e8a-8521-9d74572a3651
• Macfarlanes. “Asset-backed finance: a market view ahead of Global ABS 2026.” May 28, 2026. https://www.macfarlanes.com/insights/102mvhv/asset-backed-finance-a-market-view-ahead-of-global-abs-2026/
• Moody’s. “Private credit outlook 2026.” 2026. https://www.moodys.com/web/en/us/insights/credit-risk/outlooks/private-credit-2026.html
• Financial Stability Board. “Report on Vulnerabilities in Private Credit.” May 6, 2026. https://www.fsb.org/uploads/P060526.pdf
• Financial Stability Board. “FSB warns on private credit vulnerabilities.” May 6, 2026. https://www.fsb.org/2026/05/fsb-warns-on-private-credit-vulnerabilities/
• CNBC. “Private credit’s $2 trillion boom raises global stability fears, watchdog warns.” May 6, 2026. https://www.cnbc.com/2026/05/06/private-credit-stress-risks-financial-stability-markets.html
• International Monetary Fund. “The Rise and Risks of Private Credit,” Global Financial Stability Report, Chapter 2. 2024. https://www.elibrary.imf.org/display/book/9798400257704/CH002.xml
• Quinn Emanuel. “Private Credit Under Stress: Emerging Litigation Risks.” 2026. https://www.quinnemanuel.com/the-firm/publications/client-alert-private-credit-under-stress-emerging-litigation-risks/
• Sage Advisory. “Private Credit Markets Under Pressure: Key Risks and Investor Strategies for 2026.” 2026. https://www.sageadvisory.com/article/private-credit-markets-under-pressure-what-investors-should-heed-going-into-2026
• Morningstar PitchBook (via WealthManagement.com). “Evergreen Funds Reach $607 Billion Despite Redemptions.” 2026. https://www.wealthmanagement.com/alternative-investments/evergreen-funds-grow-to-607b-despite-redemptions
• S&P Global Market Intelligence. “Evergreen fund launches reach decade high.” March 2026. https://www.spglobal.com/market-intelligence/en/news-insights/articles/2026/3/evergreen-fund-launches-reach-decade-high-99996186
• Rio Times. “Slow Bank Loans Push Brazil’s Builders Toward Receivables Funds.” 2026. https://www.riotimesonline.com/brazil-construction-fidc-receivables-funds-credit-2026/
• ANBIMA. “Record issuances solidify Brazilian capital markets’ role.” June 2025. https://international.anbima.com.br/news/record-issuances-solidify-brazilian-capital-markets-role
• Federal Reserve Bank of New York. “Quarterly Report on Household Debt and Credit.” First quarter 2026. https://www.newyorkfed.org/microeconomics/hhdc
• AM Best. “Private Letter Ratings in the US Life/Annuity Insurance Industry.” 2026. https://news.ambest.com/
• deFI SOLUTIONS. “Auto Loan Delinquency Rates and Trends.” 2026. https://defisolutions.com/defi-insight/auto-loan-delinquency-rates-and-trends/
• Cleary Gottlieb. “Outlook for Private Credit in 2026.” 2026. https://www.clearygottlieb.com/news-and-insights/publication-listing/outlook-for-private-credit-in-2026