A private assets strategy built for today’s market
Launched in May 2024, the LOIM Asset Backed Loan strategy was designed to meet a growing need: access to stable and attractive private-credit returns with liquidity, diversification and downside protection through an open-ended structure. More than one year on, the strategy is delivering on its targets.
In a volatile environment for listed markets, our strategy has provided investors with a compelling source of uncorrelated returns: a short-duration, asset-backed lending strategy that targets a 10%-plus net return including a 7% cash yield, paid quarterly1,2. With 39 co-investments already in place and a highly selective funnel of opportunities, we believe the strategy is well-positioned to continue delivering attractive, risk-adjusted returns.
Why asset-backed lending?
Asset-backed lending (ABL) is an increasingly attractive source of returns in private credit. Unlike traditional direct lending, ABL is secured by tangible or contractual assets – ranging from receivables and real estate to media royalties and legal claims. This collateralisation provides a natural buffer against credit risk and interest-rate volatility, and most of the investments are completely uncorrelated to the broader economy.
As banks pull back from smaller loans and niche markets, the opportunity set for private capital has expanded. Yet accessing this market requires scale, relationships and expertise. That’s where our co-investment model shines. It allows us to choose the best managers we can find across all segments of private credit, and then select their best deals to put into our portfolio. In our first year, we were shown over 250 deals by more than 80 managers seeking additional capital from a like-minded partner. This has allowed us to cultivate a highly selective portfolio of loans from a range of deals that had already been selected and executed by the lead manager.
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A differentiated approach to private credit
Our strategy combines:
- Direct co-investments, targeting more than 70% of AUM, sourced through a curated network of over 80 specialist managers
- Short-duration loans (mostly one to two years) with first-lien, senior-secured ranking
- Diversification across sectors, geographies and collateral types.
This approach has enabled us to build a portfolio that is both high-yielding and resilient. All current co-investments are first-lien and senior secured, supported by robust legal structures to enable the takeover of collateral if necessary and full suites of maintenance covenants. The portfolio is highly diversified, with exposure spread across receivables, specialty finance, media finance, legal finance, real estate and other sectors. This approach draws on our shared experience in public and private credit markets, which exceeds six decades.
FIG 1. Diversified opportunities across asset-backed lending sectors3
Performance highlights
Since inception, the strategy has delivered:
- A total return of 10.7% gross of fees1
- Monthly net positive returns, with no drawdowns to date
- A Sharpe ratio of 14.14.
This performance reflects both the quality of the underlying assets and the discipline of our investment process. Our team ‘re-underwrites’ each deal it is shown and performs its own independent checks and analysis to ensure that only the most compelling opportunities make it into the portfolio.
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Case studies: selectivity in action
The following examples illustrate our focus on high-quality collateral, strong counterparties and the potential to generate attractive risk-adjusted returns across diverse sectors of asset-back lending.
- High-quality media receivables. Factoring of film licensing fee receivables from a USD 30 billion market cap film-streaming company, yielding 18% per annum over 18 months
- Port infrastructure in Australia. Financing the completion of mission critical port infrastructure with a two-year loan at less than 50% loan-to-cost paying 11.5% in AUD terms
- Legaltech services. Financing receivables generated by digital litigation support services, paid first as an expense from settlement proceeds, with a three-year loan at a 75% loan-to-value, paying 11.5%
- Short-term residential property bridge loan. One-year bridge to long-term conventional mortgage refinancing for a fully occupied, five-unit multi-family building in the Los Angeles area. The sponsor is an active real-estate investor with a 793 FICO Credit Score. The loan yields an 11.75% cash pay coupon plus entry/exit fees
- Australian Government tax credit receivables. Participation in diversified pool of R&D tax credit receivables due from the Australian Government to small businesses. The short duration exposures of six-to–12 months yield 13%.
These examples illustrate our focus on high-quality collateral, strong counterparties and attractive risk-adjusted returns.
Looking ahead
As we progress into our second year, the opportunity set remains robust. We are currently seeing more attractive investment opportunities than we have capital to deploy – a testament to the strength of our sourcing network and the growing demand for non-bank capital.
With an estimated market of about USD 11 trillion in asset-backed financing5 and only USD 450 billion of fund AUM dedicated to the strategy today, this market is in its early stage of development. We have the ability to expand the number of managers we work with as well as the number and size of our co-investments, providing us with tremendous flexibility to scale up deployment without compromising investment quality.
With strong sourcing abilities, a disciplined process, and a clear focus on capital preservation and uncorrelated income generation, we believe the LOIM Asset Backed Loan strategy is well-positioned to continue delivering for investors – through all market cycles.
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