Asset-Based Finance: A Growing Frontier for Private Credit

In our latest issue of The TPG Take, leaders across TPG Asset Based Finance discuss the expanding opportunity set within one of private credit's most dynamic sectors. From housing to digital infrastructure and investment grade ABF and more, we unpack how structural shifts – including bank retrenchment, housing lock-in, and rising data demand – are creating new opportunities for credit managers.

We also highlight how TPG’s credit platform, built on decades of experience, proprietary data, and cross public and private market flexibility, positions us to source differentiated opportunities and create lasting value for investors across market cycles.

Note: The below is an edited transcript of the interviews. For more, please watch the full videos.

Asset-Based Finance: Overview, Opportunity Set, and Differentiators

Aaron Ong: "Asset-based finance is really about providing essential liquidity to Main Street. These are things that everyday people know quite intimately, from the roof over your head to the credit card in your wallet to the loan you took out for your family business to help it grow – these are all things that people know and understand, but they don't quite realize are the bedrock of the global economy.

We're packaging thousands of diverse, granular assets and packaging them into institutional-grade transactions. And in doing so, we're creating a unique stream of income that we believe is very uncorrelated to stocks and bonds."

Yong Joe: "To sum it up, it's really about diversification, strong structural features, and cash flows that are uncorrelated to many of the other traditional private credit sectors."

TJ Durkin: "Another huge advantage for TPG's ABF platform is that we invest across both the public and private space. And so, if you're a non-bank originator, you want counterparties that can solve multiple problems for you – maybe not at once, but over the course of a relationship. And so, having flexible capital both in the public markets and dedicated capital in the private markets makes us a much more unique and flexible counterparty than a lot of the upstarts that are focusing solely on the private ABF market or the legacy players that are really just focused on the public ABF market.

When we think about the landscape over the next five years, we expect to see more credit managers looking to diversify into ABF, both as a source of growth, but as a defense mechanism from what we're seeing occur in the traditional direct lending landscape. We think they'll find it's a much harder market to penetrate, given the barriers to entry like infrastructure, tenure relationships, and just the overall complexity premium.

Within asset-based finance, the underwrite is predicated on understanding a large amount of data. Since 2008, we have been refining our investment process, incorporating new sets of data, technology, and, obviously, AI. And, you can't build this infrastructure overnight."

Yong: "The experience and long tenure of our team, coupled with our analytics and technology edge, allows us to identify unique opportunities that are less susceptible to structural shifts in economic cycles, and find opportunities to take advantage of these periods of noise."

---

Housing & Residential Development

TJ: "One of the sectors that we think is very compelling is the residential mortgage space. Today, you'll hear a new term called the ‘lock-in effect,’ which is effectively stating the obvious: many US homeowners have locked in extremely low, 30-year fixed rate interest rates on their mortgage, meaning they never want to give up that low monthly payment. At the same time, you've seen home prices enjoy strong, consistent growth since the early 2020s.

One of the opportunities this has presented, and that we have been exploring, is the evolution of the second lien market. This is where people are locked into their first mortgage, but want to tap the equity that they have in their homes, typically by doing things to improve the value of their home – renovations, add-ons, etc."

Yong: "What we really like is that the underwriting standards are very tight compared to what we've seen historically in the HELOC and second lien space. The borrowers themselves have been in their homes for over a decade, and they are responsibly using the cash-out component to spend on things like home improvement, which increases the value of the homes themselves. If you look at the credit profile or the loan-to-value profile of these HELOCs and second liens, borrowers typically have 30 to 40% of equity below your second lien position, which gives us a lot of comfort in terms of any softness in the housing market."

Marc Lessner: "However, with all that embedded home price appreciation, their combined loan-to-value with their first is pretty low. It's about 65 to 70%. That's inside of where first lien mortgages are. These are certainly not your Global Financial Crisis-era second liens that had 100% loan-to-values or more."

Yong: "The second opportunity that we find very attractive comes down to the imbalance of home supply and demand in the US. Supply and new construction have been constrained since the GFC, but this particular opportunity attaches to a different part of the value chain within the residential credit market – lending facilities or lending programs to residential developers. So, if you look at the imbalance of supply and demand that exists today, as well as the lock-in effect where you're not seeing existing inventory come to market, it creates a very strong environment for new construction."

---

CMBS & Commercial Real Estate

Marc: "One of the most compelling opportunities within ABF has been in the commercial real estate sector in CMBS (Commercial Mortgage-Backed Securities), particularly in SASB (Single Asset, Single Borrower). We believe we have an advantage in this area where there's a lot of dispersions, because we're able to be selective by having good structures, good asset transparency, and good protections. Additionally, understanding the local markets and demographic trends is key.

If you think about the CMBS market over the last four or five years, it was probably the most dislocated market in all of ABF, mostly driven by the looming maturity walls, which are largely behind us at this point in time. Additionally, sponsors have proven their ability to perform and operate their businesses and their buildings through the higher interest rate environments over the last few years. There's a lot more comfort around that, which has naturally led to more participants coming back to the market and willing to take on more risk.

We actually saw in 2025 a banner year for single asset, single borrower issuance in the CMBS market, and we expect to see that, or even greater, in 2026."

---

Digital Infrastructure

Xavier Dailly: "Five or ten years ago, there was virtually no new issuance in the digital infrastructure space, but today, we're seeing it grow quite rapidly, especially as we hear about data centers or fiber financing. Much of this was done privately, and at a much smaller scale, where today, the ABF market has been a leader in terms of the financing for these asset classes. They're very predictable cash flows that the ABF market can underwrite, and we have seen quite a bit of issuance come into the liquid side of the market in the CUSIP business where we have been participating."

TJ: "We play a pretty big role in the fiber space. Think about people focused on building huge warehouses that are holding all the servers – how is that demand getting to the homeowner? It's through fiber generally underground. At the end of the day, the consumer wants access to high-speed internet, and we think the ABF market is what's really financing that growth."

Xavier: "We have been most active so far on the fiber side of the business, and have done a lot of work on the data center side as well, but have been intentionally slower to deploy. The size of these projects and the need for capital are tremendous, and initially, the banks have been able to step in for that financing and have really taken the first slug. As some of these projects get larger and banks have been filling up, there's a need for capital formation around the space, which is where we believe will be a place for us to play.

There's two ways to think about it – either play on the construction side where you are really shorter duration capital lending to construction until you have a hyperscale or offtake; or you can play it from the more stabilized cash flow, longer-tenor perspective. We have so far gotten more comfortable on the shorter duration side of the space, and I expect that's where you'll see us enter first."

---

Insurance and Investment Grade ABF

Xavier: "There are a few reasons that the investment grade (IG) ABF space has been growing, and we believe will continue to grow. It's partially driven by the fact that we are seeing some bank retrenchment – banks are pulling back in certain areas and we do find that they are trying to lend to more simple cash flows and asset classes. Anytime that there's a bit of complexity, it really opens up the opportunity for private investment grade to step in. And the reason for that is when you have that stable insurance capital that can lend against good assets, but you can be creative and nimble in the way that you think about structuring and analyzing cash flows, those opportunities oftentimes are a better fit for the private space than they would be in the public space where it's more cookie cutter.

Now that our investor base has grown with a lot of insurance capital, we've thought about that risk differently, and we've thought of new ways to feed some of our partners the risk-return profiles that they're ultimately looking for. It really started a couple years ago via some co-investments that we did. When we started getting a better understanding of what these insurance companies were looking for, we were really able to customize what we were seeing and customize a product that would fit their balance sheet much better."

TJ: "As insurers come to us looking for ideas on how to diversify their asset mix away from corporate credit, one of the spaces that we find extremely compelling from both a spread and credit perspective is residential mortgages. It’s a huge addressable market, it's extremely scalable, but it requires a tremendous amount of operational heft. And so, one of the things that we offer our insurance partners is an ability to plug into our infrastructure. We’ve bought over $25 billion of mortgages dating back to 2013, and have built out an entire suite of proprietary analytics, due diligence, and asset management tools that allow our insurance partners to leverage our infrastructure. Not just our sourcing, but also our ability to help them with due diligence, asset management, and even pledging those assets to the FHLB.

That's an extremely attractive proposition for people looking for investment grade capabilities that aren't competing with them in their core businesses. And I think that's really been evidenced by our landmark transaction with Jackson Financial earlier this year, where we were able to get a really long-term partner to sit side-by-side with us as we explore the opportunities within private ABF, and we’re really excited about it."

---

State of the Consumer

Xavier: "The consumer has remained incredibly stable throughout this period of volatility, but we are starting to see some effects wear down that stability. If you go back to what happened during COVID and all the stimulus money, the excess savings that we saw in the consumer balance sheet is certainly starting to wear down. We hear a lot today about a K-shaped economy, and I think that can mean a few different things. I don't think that pressure on the consumer necessarily means that we need to pull back entirely from consumer lending; rather, it really means that we need to think about what aspects of consumer lending are we willing to attach to today given what we see on the horizon."

TJ: "Within ABF, we're not thinking about which specific software companies will be disrupted. Instead, we are thinking about the effect on jobs and individuals. What is AI going to disrupt first? Will it disrupt white collar jobs or blue collar jobs first? We are looking at what types of credit profile can we invest in that we think will have more durable cash flows from a consumer credit perspective."

Yong: "In essence, the places that we're focused on in terms of moving into a K-shaped economy are higher credit quality assets like residential credit, as well as essential consumer products like credit cards."

---

ICYMI: Other News & Views from TPG...

Last month, we convened our global ecosystem of investors, advisors, CEOs, and partners at the TPG Rise Annual Investor Meeting. Leaders from across our Impact Platform highlighted the opportunities emerging from a reset of the real economy and the growing “age of access,” where scalable solutions are expanding access to essential goods and services across markets. Discussions spanned impact technology, healthcare, power and the energy transition, education, and more, with a focus on where impact and performance continue to converge. Check out highlights:

In a recent episode of Investment Insights, hear from TPG President Todd Sisitsky on how our investment approach in Europe has evolved – from our first investment in 1994 to a scaled, multi-platform presence. Investing across private equity, impact, real estate, secondaries, and credit, we bring a cross-asset class approach that combines global connectivity with local insight to support companies as they scale and grow.

Thank you to all of our followers and readers for joining us for another edition of The TPG Take. Please share the newsletter with anyone you think would be interested and we look forward to being back in your inboxes.

---