In a recent 9fin webinar on asset-backed finance (ABF), industry veterans Mehdi Khalili from NNG and Victor Saratella from Liberty Mutual Investments shared their perspectives on private credit's expanding role in the ABF markets.

The discussion revealed how private credit is reshaping ABF, including the digital infrastructure, which is growing at a rapid rate.

Keep reading for the three most crucial takeaways from this webinar — and access the recording here.

1. There is nothing new under the ABF sun, it's just finding new funding sources

The narrative around private credit in ABF often positions it as a novel asset class, but both speakers pushed back against this characterization.

"I don't think it's new at all," Saratella emphasized. "These types of strategies have been going on for a long time...historically, it has been the domain of banks."

What has changed? The funding ecosystem.

Banks have retreated from warehousing and bilateral deals due to regulatory constraints and risk management considerations, and this has created a void that alternative asset managers and insurance companies have stepped in to fill.

For professionals evaluating private ABF opportunities, this historical context is super important. The underlying asset classes, such as residential mortgages, consumer loans, or equipment financing, carry decades of performance data.

The innovation lies in structuring and sourcing, not in fundamental credit risk assessment. This should inform due diligence approaches, with emphasis on manager track records in traditional ABS markets, rather than treating these as experimental asset classes.

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2. Digital infrastructure is driving current growth

Digital infrastructure emerged as the clear growth engine in private ABF, driven by AI demand and data consumption patterns. Khalili outlined three pillars responding to increased data processing and transmission needs:

• Data centers
• Fiber networks
• Cell towers and small cells

However, the speakers highlighted critical execution considerations often overlooked in the AI infrastructure hype. For data centres specifically, Khalili noted that "AI chips generate significantly more heat than older chips", and they also require specialized cooling systems.

The economic lifespan of a graphics processing unit (GPU) averages just 3-5 years, creating a risk of obsolescence — which is why data centers need to be "future-proof" in their design.

The role of private providers becomes particularly relevant during the construction and lease-up phases. As Saratella explained, public markets typically require "fully leased up, stabilized data centres," while private credit can finance the higher-risk development phase before assets migrate to public markets.

For structuring teams, this creates both opportunity and risk. The liquidity premium for private digital infrastructure deals can be substantial, but underwriting must account for technological obsolescence, construction risk, and tenant creditworthiness in a rapidly evolving sector.

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3. Manager selection intensifies as competition grows

Both speakers acknowledged the market's capacity for multiple players but warned that competitive pressures could eventually compromise a deal’s quality.

"I think the market could get riskier if folks start to compete on terms," Saratella cautioned, distinguishing between acceptable price competition and problematic structural competition.

The discussion revealed key differentiators for manager evaluation: proprietary sourcing channels and track record depth.

Saratella emphasized the value of looking for managers with "proprietary sourcing channels" who can access deals others cannot see, versus those "just competing on price with everyone else."

Khalili reiterated the importance of manager quality, particularly regarding "how they structure the downside protection of the risk" and their origination capabilities.

For allocators, this suggests moving beyond traditional return metrics to evaluate operational infrastructure and relationship networks.

The insurance perspective adds another layer: long-term investors like Liberty Mutual can absorb illiquidity but require confidence in structural protections. This creates opportunities for managers who can demonstrate sophisticated risk management rather than simply aggressive pricing.

A maturing market with room to grow

The webinar painted a picture of private ABF as a maturing market with substantial runway ahead.

The fundamental drivers, like bank retrenchment, infrastructure investment needs, and investor demand for diversification, remain intact — but success will depend on execution quality rather than market timing.

For LevFin professionals, the message is clear: private ABF represents genuine diversification opportunities, but traditional credit skills remain a must-have.

The sector seems to have a sustainable growth trajectory, but winners will be determined not by asset class novelty, but by underwriting discipline, structural innovation, and relationship management.

Check out the replay for all the insights shared in the webinar.

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