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"We had already taken the view back in 2006 that we were not comfortable with the CDO market, and so we had short exposure" |
Asset-based lending is becoming of increasing interest to hedge funds managers as a source of alpha, and to investors. Swiss fund of hedge funds Nara Capital, for example, launched a pure asset-based lending fund of hedge funds at the end of 2007. And, according to a survey compiled by the Commercial Finance Association, the US asset-based lending industry has been growing at double-digit rates annually. The association’s last survey revealed total asset-based loans outstanding to be approaching the $500 billion mark. Specialist investment group Arch Financial Products has witnessed the increasing interest in the financing strategy. In just over 12 months, the group has built up its assets under management from $100 million to $1.3 billion. Its core funds follow a private finance strategy, focusing on asset-based lending, including structured and specialist credit. In 2007, the firm’s private finance funds produced between 14% and 19% net of fees with zero monthly drawdowns for any fund.
Stephen Decani, senior partner at Arch, says that the credit crunch has created more asset-based lending opportunities.
