Värde’s Global Head of Asset-Based Finance, Missy Dolski, shared her views on the growth of Asset-Based Finance at SuperReturn Private Credit Europe.

[0:09] To provide some context, how does Värde think about Asset-Based Lending and how do you differentiate yourselves in the space?

“Värde has a 30-year history. The majority of that we’ve been in and around the ABF space. We’ve invested over $13 billion dollars since 2008. There’s been quite an evolution, actually, in our focus in ABF. We’ve gone from distressed opportunistic. We owned and operated platforms for a number of years. And today in a post-COVID world, we’re very much focused on performing credit. And that history becomes really important because we really understand the counterparties that we lend to and finance.”

[1:11] What makes the middle market attractive? Why have you not gone upstream like many in the market?

“We have found that once you kind of hit the $150 million ticket size, there are very deep pockets of capital playing in that space and it becomes more of a pricing game. I think what we like about the middle market and the profile of those platforms would be — maybe they’re not active issuers in the securitization market yet, or maybe they are but they’re entering a new geography or a new product. Our originators have decades of experience in the asset classes where they play and so we’re able to take this very much more relationship-oriented approach.”

[2:05] Give us a flavor for the sectors or industries that Värde finds most compelling today and how you are sourcing these opportunities

“Subscription lines alone are a trillion-dollar asset class largely sitting on bank balance sheets today. There’s a world in which fund finance becomes its own standalone segment within private credit. We think there’s going to be a lot of growth in that space going forward.”

[4:08] Where are we in the LP community’s adoption of ABF as an asset class? How are LPs thinking about ABF within their portfolios?

“We are getting a lot of inbounds from LPs who are very much looking for diversification from direct lending. So what ABF really provides to LPs is its current income and its downside protection in the way these assets are structured. I think we have found ABF is now a standalone asset class within the broader world of private credit. And we think we’re really well positioned to take advantage of that.”

[4:37] In your view, what does it take to be successful in this strategy? How does Värde avoid challenges in the space?

“To me, this is a relationship business. Like, you have to know the people. I was meeting with someone earlier today and they’re like, ‘Oh, you actually go on-site to diligence?’ And it’s like, of course. And not only that, but we have known these people — the CFOs, they jump around. They’re a CFO over here and then they go be a CFO over there. It’s a relationship business. And so I think it’s really important not only to know who you’re lending to, but then to have the right diligence procedures set up.”

Watch the video for Missy’s full remarks.