Asset-backed private credit is the Hot New Thing of the moment. We are in the, uh, Golden Age of Private Credit, but increasingly private markets are eating the world in every asset class, and banks, law firms and service providers are falling over themselves to create 'private capital' groups and coverage.

It’s not just pure hype, but like most things in finance, there’s nothing really new under the sun. Let 9fin peel back the veil and and dive straight in to the world of asset-backed private credit. The excitement around the private credit space can make it difficult to decipher what economic activity is actually going on.

Private credit itself covers everything from “we lent money to a company” to “we funded a tranche of non-recourse repo financing against a CRE loan for a real estate hedge fund”. As long as it ain’t listed on a regulated exchange, it’s fair game.

Asset-backed private credit or asset-based private credit or asset-based finance, or specialty finance, or specialty lending describe more or less the same set of activities. We’re going to stick with asset-backed private credit (but is asset-backed private equity a better term?), which basically covers anything you can do with portfolios of consumer and small-cap corporate loans and a bit more besides.

Turning to KKR, an enthusiastic proponent of this asset class, and you have Dan Pietrzak, global head of private credit (and occasional presence in these pages) laying it out this way:

“Think about it broadly, think about loan or credit products that finance the real-world economy. It is not traditional corporate credit, not regular loans to companies.”

Pietrzak breaks the asset class into four sub-groups — consumer and mortgage finance, commercial finance, hard assets, and contractual cashflows. But his group also does SRTs, for example, while other firms will include fund financing instruments such as NAV lending in their own definitions.

Some common threads across the KKR version are the presence of (good) security, and the law of large numbers.