From Nvidia GPUs to Fine Art, Asset-Backed Finance Market Nears $12 Trillion

ASK Global Alternative Investment Conference

ABF Emerges as a Hot Keyword

Investment Repaid Through Collateral Cash Flow

Market Estimated at Nearly $12 Trillion

"Homes, fine art and aircraft can be used as collateral. So can graphics processing units, or GPUs."

Asset-backed finance, or ABF, was a key topic at the ASK 2026 Second-Half Global Alternative Investment Conference held at the Conrad Seoul in Yeouido on October 28. ABF refers to lending based on the cash flow generated by pledged assets. Loans are typically structured so creditors regularly collect part of exhibition fees from artworks or usage fees from GPUs.

"In a standard corporate loan, the key question is whether a company can generate enough profit to repay its debt," said Jay Kim, a partner at Canyon Partners. "In ABF, what matters is how much cash the collateral asset actually produces." Because lenders recover portions of principal over time, risk declines as the loan seasons.

The ABF market is estimated at nearly $12 trillion. One driver of that growth is a pullback in bank lending. European banks are reducing loans for areas such as real estate development, creating more room for private investors to step in as lenders, said Tony McDermott, head of credit and lending solutions at Arrow Global. Because bank lending accounts for a larger share of Europe's credit market than it does in the US, non-bank investors have more space to expand there.

Rising investment in artificial intelligence infrastructure is also boosting demand for ABF. Building AI infrastructure such as data centers and GPUs requires large amounts of capital, and bank loans alone often are not enough to meet that need. "Even if a company's earnings deteriorate, investors can recover their capital through income generated by the collateral assets," said Uday Bishnoi, co-chief investment officer at Sculptor Capital.

The range of assets used as collateral is also widening. In addition to traditional assets such as residential mortgages and auto installment financing, GPUs, aircraft, heavy construction equipment and artworks are also becoming investment targets. Residential transition loans, or RTLs, which finance the purchase, renovation and resale of aging homes, are another form of ABF. According to Pimco, about 60% of owner-occupied homes in the US are more than 35 years old. Demand for repairs and remodeling in older housing can therefore create financing opportunities.

Speakers also stressed the importance of building safeguards to protect investor capital if losses occur. "ABF is not a replacement for direct lending, but a complement to it," said Kyle McCarthy, a senior vice president at Pimco. He added that investors need to diversify risk across a range of assets.

Nam Jun-woo and Song Eun-kyung, Korea Economic Daily reporters

njw0825@hankyung.com