Finding Alpha in Asset-Backed Investment Grade Credit

Connell Hasten - Victory Park Capital, Partner
Josh Platek - Victory Park Capital, Managing Director

Asset-backed credit consists of loans and securities backed by a discrete, ring-fenced pool of financial assets — such as consumer or commercial receivables, equipment leases, or specialty finance loans — with investors repaid from the cash flows those assets generate rather than from the general corporate credit of a single borrower. Institutions are allocating more to asset-backed credit as it offers several advantages over traditional corporate bonds. First, asset-backed credit typically has a spread pickup relative to similarly rated corporate bonds. Second, investors in asset-backed credit also obtain exposure to a diversified pool of assets with contractual cash flows, instead of relying on the enterprise value and cash flow generation of corporate issuers. Finally, the underlying assets are self-liquidating, and structural features such as subordinate tranches absorb losses before the investment grade tranches are impaired.

Despite the spread premium to similarly rated corporate bonds, it can still be difficult for investors to generate significant alpha in asset-backed credit. Asset Backed Securities (ABS) syndicated by banks are often significantly oversubscribed, so investors seeking exposure to an issuer may receive an allocation that is only a fraction of their interest level and is priced at a tighter spread than originally expected. Given the number of investors participating in a syndication, an individual investor also has little ability to dictate terms.

VPC believes the private asset-backed credit market offers an attractive source of alpha. In the private market, an investment manager originates a transaction directly with the issuer instead of going through a syndicated bank process. This gives the investment manager the ability to negotiate deal terms and customize the collateral pool, structural enhancements, and transaction duration. Investors also earn a spread premium relative to the syndicated market. In return, the company gets certainty of execution with one counterparty and diversifies its funding sources.

Accessing the private asset-backed credit market can be challenging for investors. Unlike a bank-led process, which requires no direct relationship with the issuer, sourcing private asset-backed credit transactions requires a dedicated origination effort. An investor also needs substantial underwriting resources and risk management systems to properly diligence assets and monitor collateral performance post-closing.

Why VPC’s ABIG strategy is well positioned to generate alpha for investors

VPC has been investing in private credit for two decades, having deployed nearly $12 billion across 245+ transactions since inception¹. That history reflects a sustained, full-cycle commitment to the asset class rather than an opportunistic one — VPC has remained a consistent participant in asset-backed credit through multiple market cycles, giving the Firm the underwriting discipline and risk infrastructure that come from being a long-term resident of the market, not a tourist passing through it.

VPC has a distinct market niche among investment managers in the private asset-backed credit space. Many other managers focus solely on originating deals with large businesses that have already completed a securitization. Instead, VPC has also dedicated funds that target early-to-mid-stage businesses that have strong credit profiles but are not yet large enough to access the securitization market. Over time, these issuers grow larger, build longer track records, and see their credit risk decline — allowing them to command a lower cost of funds and secure a credit rating.

At that point, VPC is a well-positioned lender to provide the business with an investment grade rated warehouse or term financing. If a VPC fund is an existing lender to the business, this represents ‘captive’ deal flow – often contractual via rights of first refusal – that other investment managers are typically unable to access. Many existing VPC portfolio companies are willing to pay VPC a spread premium to do an IG-rated deal, in order to execute the transaction more seamlessly and cost-effectively than they could with a new lender.

Having already been a lender to the business, VPC also has differentiated insight into credit risk and can price a deal more appropriately than a new lender could. VPC uses the same underwriting processes and risk management systems for the ABIG strategy, but the focus shifts to more established businesses at a lower attachment point and lower cost of capital.

For companies without an existing VPC facility that eventually graduate to an investment grade cost of funds, VPC still has a sourcing advantage. Most other investment grade asset-backed credit managers will not approach companies until they are large enough to do a rated securitization, whereas VPC will have already developed a relationship over the prior several years.

In addition to the differentiated origination pipeline, VPC has significant credit rating expertise. Senior members of the team have prior experience structuring rated deals at a large U.S. insurer and have a thorough understanding of each rating agency’s methodologies and processes. VPC also has a broker-dealer affiliate, Triumph Capital Markets (TCM), that has executed over $2 billion of rated capital solutions to date¹. TCM assists VPC on ABIG transactions to optimize the ratings and structural features of the deal.

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IMPORTANT DISCLOSURES

Victory Park Capital Advisors, LLC ("VPC" or the "Adviser") is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. VPC is majority-owned by Janus Henderson Group plc. This letter is provided for informational purposes only and does not constitute investment, legal, tax, or accounting advice, a solicitation, or an offer to buy or sell any security or investment product. The information herein does not take into account the particular investment objectives or financial circumstances of any recipient. This letter is confidential, is intended solely for the recipient, and may not be copied, reproduced, or redistributed, in whole or in part, without VPC's prior written consent, and must be returned to VPC upon request.

This information is being provided to you by VPC or Janus Henderson Investors ("JHI") on a strictly confidential basis for discussion purposes only. This material has been produced by VPC. JHI owns a majority stake in VPC. VPC has consented to allow JHI to use this letter for discussion on VPC capabilities and product sets with accredited investors and institutional investors only. JHI does not actively manage this product or strategy.

This letter contains forward-looking statements, which can be identified by the use of words such as "believes," "expects," "may," "will," "should," "seeks," "approximately," "intends," "plans," "estimates," "anticipates," or their negatives or other comparable terminology. Forward-looking statements are subject to significant risks and uncertainties, and actual results, performance, or achievements may differ materially from those expressed or implied. VPC undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

The views expressed in this letter are those of the authors and VPC as of the date of this letter, are subject to change without notice, and may not come to pass. Characterization of market conditions reflects the views of VPC; other market participants may reasonably have other views. There can be no assurance that VPC will be able to implement the ABIG strategy or achieve its investment objectives. Unless otherwise noted, all information contained in this letter is as of June 30, 2026.
The information contained herein is based on sources believed to be reliable; however, VPC makes no representation or warranty, express or implied, as to the accuracy, completeness, or timeliness of such information. References to market data, industry statistics, and third-party sources are provided for informational context only and have not been independently verified by VPC.

Credit ratings are the opinions of the issuing rating agency, are not recommendations to buy, sell, or hold any security, do not address market value or suitability, and may be revised or withdrawn at any time. An investment grade rating does not guarantee repayment or protect against loss.

This letter does not purport to be a complete description of the VPC Asset Backed Investment Grade Strategy (ABIG), the applicable fund(s), or the risks associated with an investment therein. The information herein should be read in conjunction with the applicable confidential private placement memorandum, limited partnership agreement, and other governing documents (collectively, the "Offering Documents"), which contain important information about the strategy, including a description of risks, fees, expenses, liquidity constraints, and conflicts of interest. In the event of any conflict between this letter and the Offering Documents, the Offering Documents shall govern. Prospective investors should carefully review the Offering Documents and consult with their own legal, tax, and financial advisers before making any investment decision.

Past performance is not indicative of future results. All investments involve risk, including the potential loss of principal.