How to unlock the full potential of asset-backed lending

This final instalment in our series on ABL focuses on the importance of specialist expertise and deal access in building a diversified portfolio. Larger private asset managers often lack the sourcing capabilities required to reach smaller areas of the market. They therefore tend to concentrate on more established securitised assets – such as auto loans, credit cards, aircraft finance and buy now, pay later.

We show how LOIM’s co-investment model can bring together capabilities across multiple asset classes to access the full opportunity set in ABL. 

related content.

private assetsAsset Backed Loan

private assetsAsset Backed Loan

Defensive by design: the case for asset-backed lending in 2026

April 13, 2026

Asset Backed Loan

learn more

Why ABL remains attractive in 2026 – a brief recap

As explained in our previous article, ABL offers a distinctive blend of yield, downside protection and diversification. Returns are secured by real, monetisable collateral, typically with short durations and predictable repayment structures. These features help insulate portfolios from challenges facing other areas of private credit, including valuation volatility, liquidity mismatches and sector-specific stresses.

At LOIM, we focus on senior, first-lien exposures underwritten at conservative loan-to-value ratios across a broad range of asset types and geographies. Portfolio outcomes are driven primarily by asset-level fundamentals and performance of the underlying collateral – rather than corporate cash flows or macroeconomic cycles. 

A significant proportion of the portfolio is in segments that are not cyclical or economically sensitive, such as tax-credit financing, legal lending and media finance. These investments thus behave differently than equities, high-yield loans and traditional direct lending, which can ultimately enhance diversification.

The limits of generalist ABL: biggest isn’t always better

Scale interacts with sourcing reach and expertise in complex ways with ABL. Large pools of capital are not inherently disadvantaged, but without sufficient sourcing reach and expertise across multiple specialist asset classes, generalist funds gravitate to the bigger, more standardised assets and structured credit. 

Smaller deals in specialist markets demand the same level of underwriting, legal structuring and operational oversight as much bigger deals. For larger funds, allocating resources to smaller transactions in specialised market segments is often uneconomic, irrespective of the quality of the opportunity.

Read also: The surging opportunity in asset backed private credit

Why specialist expertise matters in ABL

ABL is ultimately about the assets. Assessing risk comes down to understanding how the collateral performs in both good times and bad, how much control a lender has over the assets and how easily they could be sold, if necessary.

Specialist managers develop deep, domain-specific expertise that generalist platforms are unlikely to replicate across many markets. For example, a manager focused exclusively on media assets will typically have greater insight into the market value of a film library, the economics of distribution by territory, and the practicalities of taking control and selling assets if necessary. 

This depth of knowledge directly impacts underwriting discipline, structuring and recovery outcomes, and it is a key reason why specialist strategies can generate superior risk-adjusted returns over time.

The diversification challenge for investors

While this specialisation confers clear advantages when it comes to exploiting inefficiencies within a chosen market, it also introduces constraints. Specialist funds are, by definition, concentrated and challenging to scale. An investor seeking diversified exposure to ABL therefore faces two options: 

LOIM’s solution: aggregated expertise with selective deal access

LOIM’s Asset Backed Loan strategy is designed to resolve this trade-off. Through a co-investment led model built around partnerships with specialist loan providers, we can aggregate deep domain expertise across multiple ABL market segments while maintaining diversification at the portfolio level.

Crucially, the strategy does not allocate capital indiscriminately to underlying funds. Instead, LOIM selects individual transactions, allowing us to access the most attractive investments each specialist manager makes. This ensures that the portfolio avoids undue exposure to any single sector or risk type – such as software, which has recently posed challenges for many private credit managers.

Read also: LOIM’s Asset Backed Loan strategy: built for diversified, defensive returns

Scalability without leverage or junior risk

This approach allows the strategy to scale by expanding sourcing reach and the number of specialist partnerships, rather than increasing exposure to the same assets. Even as the fund grows, diversification is reinforced rather than diluted, and there are enough investments to meet target returns without having to take on leverage or riskier assets.

By contrast, where sourcing breadth is limited, managers may resort to fund-level leverage or increased exposure to mezzanine or subordinated risk to achieve target returns. LOIM’s Asset Backed Loan strategy does not employ fund leverage and remains focused on senior, first-lien positions, preserving the defensive characteristics central to asset-backed lending.

Bringing our approach to life: co-invest deal examples¹

Moving beyond the mainstream in ABL 

Achieving more effective diversification in asset-backed lending requires that investors access specialist markets across a wide range of strategies, geographies, segments and collateral types, in our view. Through its partnerships with more than 140 specialist managers to date, LOIM’s Asset Backed Loan strategy aggregates deep domain expertise into a single, highly diversified portfolio. 

The result is exposure to the full opportunity set within ABL while maintaining a disciplined focus on capital protection, consistent income and unlevered, risk-controlled returns.