Private Credit Insights: Play Ball!
Chris Lyons, CFA
Head of Private Fixed Income and Alternatives
Key Takeaways
ABF is a buzzy marketing term, but at its heart the sector has been around for 30 years. For example, ABF has long been the dominant form of credit for sports teams.
Voya has been one of the biggest names in sports lending for decades. We look at case studies of the major deal types: club rights, stadium, and league rights.
In portfolios, ABF can be used as a higher-spread replacement for comparable public bonds or, in risk-off situations, as a potential replacement for more cyclical equities.
Investors who wish to have access to the entire private credit spectrum will likely need to hire multiple managers. When selecting, they should prioritize transparency, communication, and experience over the illusion of the one-stop shop.
Sports teams’ capital needs are often best served by asset-based finance, such as media rights and infrastructure transactions, rather than corporate debt. We look at some case studies in sports lending and, more broadly, how to think about ABF allocations in portfolios.
What, this old thing?
Asset-based finance (ABF) has been around for 30 years, but it’s only become a marketing term recently, as the private credit market has experienced an influx of both new originators and new investors. If you have a private credit portfolio, you might even own some ABF and not be aware of it.
If you have a private credit portfolio with us, you almost definitely already own some ABF—we’ve done more than 500 private securitized and infra deals over our history, ranging from merchant receivables, media rights, and fund finance to stadiums, ports, toll roads, and energy (so much energy). We like deals with a lot of structure; I’d definitely rather get paid to take structural risk than additional credit risk. Even our corporate placements tend to be highly structured— it’s one of the ways we consistently deliver above-average spreads to our clients.1
A note about risk: All investing involves risks of fluctuating prices and uncertainties of rates of return and yield. All security transactions involve substantial risk of loss.
Private credit: Foreign investing does pose special risks, including currency fluctuation, economic, and political risks not found in investments that are solely domestic. As interest rates rise, bond prices may fall, reducing the value of the share price. Debt securities with longer durations tend to be more sensitive to interest rate changes. High yield securities, or “junk bonds,” are rated lower than investment grade bonds because there is a greater possibility that the issuer may be unable to make interest and principal payments on those securities. Other risks of private credit include, but are not limited to: credit risks, other investment companies risks, price volatility risks, inability to sell securities risks, and securities lending risks.