Neuberger Berman's NB Asset-Based Credit Fund: A Strategic Access Point to a $5 Trillion Private Credit Market

The private credit market has emerged as a critical alternative to traditional bank lending, expanding from $230 billion in 2008 to over $2 trillion today, with projections suggesting it could surpass $5.4 trillion by 2027. This growth is driven by a seismic shift in the financial landscape: banks, constrained by regulatory frameworks like Basel III Endgame, are retreating from riskier credit markets. In their absence, private credit providers are stepping in to fill the void, offering tailored financing solutions to small businesses, consumers, and niche sectors. For individual investors, however, accessing this high-yield, alternative income space has historically been a challenge—until now.

Neuberger Berman's NB Asset-Based Credit Fund (NABFX), launched as an interval fund, is redefining accessibility. Structured to provide daily share offerings and limited quarterly liquidity opportunities, the fund bridges between illiquid private credit and the liquidity demands of retail investors. By focusing on short-duration, asset-backed investments—such as receivables, small business loans, and revenue-backed instruments—the fund mitigates the long-term lockups typical of private equity while targeting a weighted average duration of just 18 months. This approach not only aligns with the post-bank lending environment but also caters to a market hungry for diversified, uncorrelated returns.

Democratizing Access to a $5 Trillion Opportunity

The fund's structure is a deliberate response to the limitations of traditional private credit. Historically, individual investors required high minimums, complex legal structures, and patience for illiquid assets. Neuberger Berman's interval model, however, democratizes access by offering daily share valuations and quarterly repurchase requests, making it a viable option for a broader audience. The fund's minimum investment threshold is significantly lower than institutional-grade alternatives, and its 1099 tax reporting simplifies compliance for individual investors.

Ask Aime: Can Neuberger Berman's NB Asset-Based Credit Fund help me tap into the $5 trillion private credit market?

This innovation is not just structural but strategic. The fund's management team, led by Neuberger's specialty finance group, has a proven track record. The group's prior fund, NB Specialty Finance Fund III LP, raised $1.6 billion—exceeding its original target—demonstrating strong demand for its asset-based strategies. The team's expertise spans decades, with an average of 20 years in investment management, and its focus on middle-market opportunities taps into a sector projected to generate robust returns.

Capitalizing on the Post-Bank Lending Environment

The fund's timing is impeccable. As banks offload credit risk to meet regulatory capital requirements, private credit providers are filling the gap. Neuberger Berman's focus on asset-backed deals—such as its $1 billion partnership with ClarityPay for retail and medical point-of-sale loans—positions it to capitalize on this trend. These investments are inherently collateralized, reducing default risk while offering higher yields than traditional fixed-income assets.

Moreover, the fund's evergreen structure, similar to Neuberger's broader NB Access Fund, allows continuous capital flow, ensuring flexibility in a dynamic market. This is particularly valuable in a low-yield environment, where investors are increasingly seeking income-generating assets. The fund's active management approach—diversifying across collateral types and sectors—further insulates it from sector-specific downturns.

Why This Fund Stands Out

Three factors make the NB Asset-Based Credit Fund a compelling proposition:
1. Liquidity Innovation: Interval funds are gaining traction as a hybrid between private and public markets. By offering quarterly redemption windows, the fund balances liquidity with the returns of private credit.
2. Diversified Collateral: The fund's portfolio spans receivables, hard assets, and revenue-backed instruments, reducing concentration risk.
3. Regulatory Resilience: With banks exiting riskier segments, the fund's asset-backed focus aligns with a structural shift in credit provision.

For investors, the fund represents a strategic allocation to an asset class that is both high-yield and uncorrelated with traditional equities and bonds. Its 18-month duration also provides flexibility in a rising-rate environment, where longer-duration assets face valuation risks.

Investment Advice: A Cornerstone for Income-Seeking Portfolios

The NB Asset-Based Credit Fund is particularly well-suited for investors seeking diversified income streams and those wary of the volatility of public markets. Given the fund's alignment with the $5 trillion private credit market's growth trajectory, it should be considered a cornerstone for portfolios aiming to capitalize on the post-bank lending era. However, investors should monitor the fund's net asset value (NAV) trends and its ability to maintain consistent redemption rates, as interval funds can face liquidity constraints during market stress.

In a world where traditional credit channels are narrowing, Neuberger Berman's offering is more than a product—it's a paradigm shift. By democratizing access to private credit, the fund empowers individual investors to participate in a market once reserved for institutions, all while navigating the evolving credit landscape with agility and expertise. For those seeking to diversify their income sources and hedge against traditional market risks, the NB Asset-Based Credit Fund is a strategic access point to a $5 trillion opportunity.