The Data Secrets Behind the $Multi-Trillion Rise of Asset-Based Finance
<p>As banks retreated from 2008, Private Credit filled in the gap. What started as a niche within private equity now operates like a global lending system. And it extends beyond corporate balance sheets, <strong>asset-based finance</strong>, the ability to lend against real, cash-generating assets is growing fast and offers countless opportunities. The real unlock isn’t just capital — it’s the <strong>data and technology allowing to manage these assets at scale</strong>.</p><p>Granular, asset-level data enables better underwriting, continuous monitoring, and access to previously illiquid markets. </p><p>In my conversation with Cesar Estrada, we explored:</p><p>* How private credit replaced traditional bank lending</p><p>* Why asset-backed finance is now being unleashed</p><p>* How to understand the fall of Tricolor and First Brands</p><p>* And how data and technology could be defining the winners in this market</p><p>A few highlights from our conversation</p><p>Asset-based finance - an ever-expanding universe</p><p> <em>Asset-based finance means that instead of lending against the future cash flows of a company, you’re lending against an asset and the contractual cash flows associated with that asset. That’s a very broad definition, and it can include anything within, the consumer, finance world, buy now, pay later, credit cards, auto loans, student loans, any personal term loans, residential mortgages, home, equity lines of credit, the list, keeps on going on as you move outside of a consumer world into, other types of things.</em></p><p><em>Any type of account receivable, supply chain financing, litigation finance, and then more esoteric stuff like, synthetic risk transfers and other things. And it’s becoming very specialized by verticals: aviation finance, medical equipment finance…</em></p><p><em>It has possibly a larger addressable market than direct lending. It offers a lot of runway for growth for private equity, private credit firms, hedge funds, and insurance companies participating directly in this space.</em></p><p>The need for data feeds</p><p> <em>From a risk management perspective, given the rate of change of a consumer world, loans are being paid, new loans are being issued, loans are being not paid. You want to be </em><strong><em>monitoring this much much more real time</em></strong><em> than you do in a corporate book, where you’re getting monthly reporting from the borrower and you are comparing their latest actual financials against the original underwriting thesis against prior periods. And you do that activity once a month.</em></p><p><em>This is not a once-a-month thing. This is a daily thing. You want to see how it’s changing because it’s changing very dynamically.</em></p><p>I was surprised that this frequency of data was even a possibility, and Cesar also added that it goes beyond risk management; it also feeds into the creation of funds for private investors with daily NAV and daily liquidity.</p><p> <em>The frequency of reporting increases, the liquidity choices increase, and the volumes and rate of change in the investment strategies increase. That all compounds to necessitate a very robust, modern technology to process all of that data.</em></p><p>The First Brands & Tricolor question</p><p>Cesar mentioned he didn’t have any specifics on the situation, and when I asked about the data issue, his response from a data management provider was to be expected.</p><p><em>It is certainly possible that better data with more accuracy and more frequency could have helped offer a view that those assets were being used as collateral with multiple lenders. […]</em></p><p>But I wanted to dig a bit further, and at first, the response confirmed that when a crisis happens, all assets that are linked to it fall at the same time, even if in the long term, there’s dispersion (like banks during the Global Financial crisis)</p><p><em>In terms of how it happened so quickly, so abruptly. Again, pure speculation, I think that those things might have been bubbling without the public knowing for a while. But as soon as a big source of financing decides that you’re no longer creditworthy, all of the other sources of financing follow suit, and it’s very abrupt. You can face a liquidity challenge and go bankrupt.</em></p><p>It reminded me that Apollo Global Management shorted First Brands’ credit risk before the company’s fall, showing the <strong>information asymmetry</strong> that still exists in private credit. This requires a few caveats: First Brands was more direct lending; Tricolor was more linked to asset-based finance; nothing says that Apollo had better data. Yet, until the data-based approach that Cesar described becomes table stakes, it could be an important differentiator.</p><p>Related episode:</p><p><strong>About Cesar Estrada:</strong>Cesar oversees Arcesium’s investment operations, accounting, and data management solutions for private markets fund managers and institutional investors. Previously, he served as Senior Managing Director and Alternatives Segment Head for North America at State Street – a role in which he drove the growth agenda for a business with approximately $1 trillion in Assets Under Administration (AUA) by leading new product launches, expansion into new client segments, strategic partnerships, and acquisitions. Prior to that, as a Managing Director at J.P. Morgan, Cesar led the Private Equity & Real Estate Funds Services business from launch to $350Bn AUA. While at J.P. Morgan, he also held investment banking roles in New York, London, and Hong Kong.</p><p>Link: https://www.arcesium.com/authors/cesar-estrada</p><p><strong>About the Investlogy podcast:</strong>Investology is a podcast dedicated to rethinking investment management and uncovering new ways to deliver better outcomes for investors.Listen on every podcast <a target="_blank" href="https://pod.link/1511595070">platform</a>, or watch on <a target="_blank" href="https://www.youtube.com/@investology_podcast">YouTube</a>.</p><p><strong>An episode produced by </strong><a target="_blank" href="http://orama.tv/"><strong>Orama</strong></a><strong>:</strong></p><p>Accelerate sales to the financial industry with content that builds trust and drives pipeline with sales-driven video strategies.</p><p><strong>About the Host:</strong></p><p>George Aliferis, CAIA is the founder of Orama, where he has produced content for financial brands and multinationals including Amazon, Expedia, Louis Vuitton, and Unilever. Before that, he spent over a decade structuring, marketing and selling complex financial products to institutional clients in Europe and Asia.</p><p>LinkedIn: https://www.linkedin.com/in/george-aliferis-60078312/</p><p><strong>My Investing & Investment Management YouTube Channels</strong></p><p>* <a target="_blank" href="https://www.youtube.com/investorama">Investorama</a> - Separating Investment Facts from Financial Fiction (YouTube)</p><p>* <a target="_blank" href="https://www.youtube.com/@investorama_podcast">Investology</a> - Re-Think Investment Management (YouTube)</p> <br/><br/>This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit <a href="https://investorama.substack.com?utm_medium=podcast&utm_campaign=CTA_1">investorama.substack.com</a>
