(Bloomberg) -- Pacific Investment Management Co. is building out its investments in asset-based finance to meet client demands to diversify away from more traditional areas of private credit.
"That's an area that's really picking up speed in terms of the availability of finance outside of banks," Christian Stracke, president and global head of credit research at Pimco, said in an interview on Bloomberg TV.
The strategy, which focuses on non-bank lending to sectors such as residential mortgages, credit cards and auto loans, has been a key plank of the bond giant's push into private lending, Bloomberg reported last year. The market is on track to reach $1.3 trillion in 2030, up from $625 billion in 2023, according to estimates by consultancy firm Maximize Market Research.
"Managers like Pimco are very actively building out strategies to be able to provide financing in these areas where banks really have retreated, but where households still need access to credit."
Stracke has previously told Bloomberg he expects more whole loan sales, where banks make loans and sell them to asset managers outright without securitizing them into asset-backed securities.
Pimco has been one of the loudest prophets of doom on private credit in recent years. In Thursday's interview he pointed to a slowdown in the corporate lending market, which has partly been driven by a drop in activity in private equity.
He also raised concern about sub-investment grade companies borrowing floating-rate notes because rates are likely to remain higher for longer than people expected.
Tariff Volatility
Outside of private credit, Stracke said it's hard to see that the volatility related to tariffs is over despite a US court order this week blocking many of the import taxes imposed by President Donald Trump.
He added that the process of foreign investors rebalancing portfolios away from the US will continue through this year and next, putting pressure on long-dated Treasuries. Pimco's portfolios are underweight the long end of the curve, he said.
"It should be something that's reasonably manageable, barring any alarming changes on tax policy or on tariffs," Stracke said.
(Updates to add background, quotes from fifth paragraph.)
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