Inside Private Credit: Comparing Direct Lending and ABF

Private credit is evolving, and investors have more ways than ever to access it. As banks continue to retrench and traditional financing channels become more constrained, private credit has become a core allocation for investors seeking income, risk mitigation and diversification.

Within private credit, direct lending and asset-backed finance (ABF) stand out as two distinct— and complementary—approaches. While both aim to deliver attractive risk-adjusted returns, they differ meaningfully in borrowers’ sources of repayment and risk drivers. Understanding these differences can help investors build more resilient portfolios across market cycles.