Visual Guide to Hedge Funds

CHAPTER 12 Credit- and Asset-Based Lending

Over the past few decades hedge fund strategies have broadened significantly and diversification has generated demand for asset-based and credit-based-lending strategies. Prior to the 2008 financial crisis, asset and credit lending had fully infiltrated the ranks of hedge funds, as the competitive nature of the lending sector had pushed lenders to the far reaches of the credit spectrum.

Asset-based lending is the funding of projects or operations secured by an asset. The collateral posted by the borrower is an asset that will be confiscated if the borrower defaults on the loan. A home mortgage is one of the best examples of an asset-based loan. In this example, a bank or hedge fund will lend money ...