In this animated explainer video, we unpack what portfolio finance is, why it’s gaining traction, and how it’s helping investors tap into private markets with flexibility, diversification, and downside protection.
Over the last decade, private markets have grown at rapid speed, but bank capital hasn’t kept up. This has created a funding gap—and with it, a potentially compelling opportunity in portfolio finance.
What is Portfolio Finance?
Portfolio finance offers an alternative way to fund private market portfolios. It’s part of the broader fund finance universe, sitting between traditional subscription line financing and higher-risk preferred or equity-like strategies. “Core” portfolio finance delivers investment-grade financing solutions to diverse portfolios of private market assets.
How is it used?
In private credit and real estate debt, it can increase a manager’s buying power, potentially enhance returns, and attract new investors seeking customized exposures.
In secondaries, it’s used as a portfolio management tool and may help close the bid-ask spread between buyers and sellers.
In GP financing, it provides capital for fund managers to scale their businesses and align more closely with LPs. It also supports portfolios that include a number of GP stakes strategies.
Why is it gaining traction among investors?
Portfolio finance can serve as a diversifier and enhancement to traditional fixed income allocations. With investment-grade ratings, seniority, and diversified collateral, it offers capital preservation with the potential for attractive risk-adjusted returns. It can also deliver structural alpha and has historically offered a spread pick-up over public investment-grade credit.
Looking Ahead
Private markets are projected to reach or exceed $20 trillion by the end of the decade. Portfolio finance is expected to play a central role in this evolution—opening new doors for investors and enabling capital to be deployed quickly into private markets.
Forecasts in this document reflect Barings’ market views as of the preparation date and may change without notice. Projections are not guarantees of future performance. Investments involve risk, including potential loss of principal. The value of investments and any income may fluctuate and are not guaranteed by Barings or any other party. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. Examples, portfolio compositions, and investment results shown are for illustrative purposes only and do not predict future outcomes. Actual investments may differ significantly in size, composition, and risk. No assurance is given that any investment will be profitable or avoid losses. Currency exchange rate fluctuations may impact investment value. Prospective investors should consult the offering documents for detailed information and specific risk factors related to any Fund/Strategy mentioned.
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