June 24, 2022
John Hancock Asset-Based Lending Fund
What is asset-based lending?
Asset-based lending is a sector of private credit that comprises loans backed by hard and financial assets. Private credit has existed in institutional markets for decades and is gaining traction among private investors looking to complement existing portfolios with alternative yield sources, potential uncorrelated returns, and through-cycle investment strategies.
What’s behind the rise of private credit?
A number of factors are driving the rise in private credit, which has grown to a market size of around $1.2 trillion, more than triple what it was a decade earlier.¹
Potential for higher yields
Diversification and low correlation with other asset classes
Strong downside protection from both underlying asset coverage and the potential for stable cash flow payments
Overall growth in nonbank lenders globally since the global financial crisis, which is driving greater sophistication and customization in asset-based lending
1 Preqin, as of October 2021.
Characteristics of asset-based lending
Understanding the investment opportunity
Asset-based lending investments are loans secured by hard or financial assets
Complexity and liquidity premium potential due to sourcing underwriting and originating private loans
Contractual cash flows
Asset-based lending has contractual cash flows, which have the potential for a stable cash flow stream and potential high current income
Deals typically include protective loan covenants and ownership of collateral that aim to protect investors
Investing with John Hancock Investment Management
John Hancock Asset-Based Lending Fund offers investors:
Potential for low volatility and low correlation with other major asset classes
The potential for high current income through stable, contractual cash flows
Access to an all-weather strategy that aims to perform through credit cycles
Access to differentiated private credit strategies through an experienced manager with specialized expertise
Liquid securitized credit to complement private loans and provide sources of liquidity
A focus on downside risk and capital protection
A high-quality, diversified portfolio across various private credit market subsectors
Diversification within private markets is critical for success and requires both depth of expertise and well-established relationships to help secure the most attractive opportunities.
John Hancock Asset-Based Lending Fund invests in sectors that have been identified for their long-term return potential and ability to perform at varying points within a credit cycle with the aim of providing an all-weather approach to private credit.
Dynamic portfolio allocation
Marathon Asset Management has deployed over $20 billion across multiple asset-based lending sectors since the early 2000s.
- Flexible asset allocation that adapts to the changing economic environments
- Provides clients with attractive portfolio diversification through exposure to broader private credit opportunity set and diversified pools of hard and financial assets with varying borrower profiles
- A focus on areas of the specialty finance and asset-based market where Marathon has specialized teams and expertise
- Seeks to opportunistically identify mispriced assets and funding gaps in areas of the market that are underserved by traditional lenders
- Speciality financings sourced through nontraditional niche channels
|Fund's strategy||Active investor since (Marathon Asset Management)²||Target sector allocations||Fund strategy overview|
|Residential mortgage loans||2002||10%—25%||The origination and acquisition of residential real estate loans, legacy mortgage loan pools, and newly originated non-agency mortgage loans|
|Healthcare loans and royalties||2006||10%—25%||Healthcare loans secured by revenue, intellectual property rights, and royalty streams on primarily FDA-approved drugs and devices|
|Transportation loans and leases||2005||10%—25%||Transportation assets such as loans and leases backed by commercial aircraft and shipping vessels|
|Consumer loans||2002||10%—25%||Acquisition of consumer loans, including distressed loans, and high-yield asset-backed securities (ABS) backed by various forms of non-mortgage household debt largely focused on select market segments such as automobile loans and leases, credit cards, and personal installment loans|
|Commercial real estate loans||2003||10%—25%||The origination and acquisition of commercial real estate loans secured by housing-related and traditional commercial real estate property types|
|Liquid securitized credit||2003||At least 10%||Securities backed by residential real estate (RMBS), commercial real estate (CMBS), collateralized mortgage obligations (CMOs) secured corporate loans (CLOs) and ABS|
|Corporate asset-based lending||2002||0%—10%||Asset-based corporate credit secured by real estate, equipment, receivables, inventory and intellectual property rights, among other assets|
|Structure||This fund is a continuously offered unlisted closed-end tender offer fund registered under the Securities Act of 1933 and Investment Company Act of 1940|
|Investment objective||To seek high current income as a primary objective; secondary objective is capital appreciation|
|Redemption policy||The fund expects to have quarterly tenders of up to 5% of shares outstanding, subject to board approval³|
|Investor qualifications||Accredited investors|
|Management fee||1.35% on managed assets|
|Incentive fee||12.5% over a 5.0% hurdle on pre-incentive fee net investment income subject to a catch-up feature⁴|
|Seed capital||$100 million|
|Class I||Class D||Class S|
|Availability||Through fee-based (wrap) programs, registered investment advisers, and other institutional and fiduciary accounts||Through fee-based (wrap) programs, registered investment advisers, and other institutional and fiduciary accounts||Through transactional/brokerage accounts|
|Initial and subsequent investment minimums||$1,000,000/$100,000||$10,000/$5,000||$10,000/$5,000|
|Upfront fee (commission)||None||Up to 1.5%||Up to 3.5%|
Minimum investment amounts may be reduced or waived by the fund at its sole discretion. All shares repurchased less than one year after the date of purchase are subject to a 2% early repurchase fee regardless of share class. Any sales load will reduce the amount of an investor's initial or subsequent investment in the fund, and will not form part of an investor's investment in the fund. The sales load may be waived in certain circumstances at the advisor's discretion. Please see the fund's prospectus for more information.
About Marathon Asset Management
Marathon Asset Management was established more than 24 years ago and has over $23 billion in assets under management⁵, with a focus on private credit. Consisting of a global team of 161 professionals located in offices in New York, London, and Tokyo, the team is experienced and dedicated to managing capital in a prudent and productive manner that seeks attractive risk-adjusted returns while having a keen focus on alignment of interest with investors. Marathon’s private credit business spans direct lending and asset-based lending, and includes expertise in healthcare and aircraft leasing along with real estate lending. John Hancock Investment Management appointed Marathon Asset Management as manager of the fund for the team’s significant global experience of investing through multiple credit cycles. The team is fully integrated, which enables it to capitalize on credit opportunities globally, and possesses a differentiated, broad-based skill set and proprietary platform to research, analyze, and act on complex capital structures and situations.
5 AUM is estimated as of December 31, 2021, and includes undrawn commitments netted for investments in affiliated vehicles. Represents total assets managed for the fund including leverage provided by the fund’s financing provider.
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Louis is the chief investment officer, a co-managing partner, and a member of Marathon’s investment committees and executive committee. Louis oversees Marathon's portfolio managers and their investment activities. His responsibilities also include managing risk on a firm-wide basis, as well as serving as senior portfolio manager for the firm's multi-strategy credit investment funds and separate accounts. He has extensive trading experience and expertise as an asset manager, arbitrageur, and risk manager in both the equity and fixed-income markets on a global basis. Prior to co-founding Marathon in 1998, he was a managing director at Smith Barney, where he was responsible for all trading and risk management in the global emerging markets debt trading division. Earlier, he was a director of the global emerging markets debt and foreign exchange derivatives trading division at Merrill Lynch. In 1991, he pioneered the use of warrants on a basket of Latin American equities at Nomura Securities. Louis previously traded European sovereign debt futures at First Chicago Capital Markets and was a floor trader at the Chicago Board of Trade. He received a B.A. in Economic History from the University of Chicago and an M.B.A. from the Graduate School of Business at the University of Chicago.
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Andrew is a partner, head of Marathon’s structured credit group, and a member of Marathon’s executive and investment committees. Andrew is responsible for the principal investment decisions of Marathon’s structured credit business. Prior to Marathon, he worked at Guggenheim Capital Markets, where he established a trading and advisory business focused on credit sensitive situations relating to structured finance and hard assets in real estate related markets. Previous to that, Andrew worked in a similar capacity at Marathon Asset Management. He also worked at Smith Barney, where he was head of CMBS trading and securitization. Andrew began his career at Donaldson Lufkin & Jenrette, in the real estate finance group. He holds a B.A. in Economics from the State University of New York, Binghamton University.
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Edward is a principal and managing director in Marathon's structured credit group and a member of the executive committees, investment committee, and diversity and inclusion council. Edward is responsible for portfolio construction, asset allocation and overall fund strategy for Marathon’s long-only, high-yield, and private asset-based investment strategies. He is currently a portfolio manager for asset-based lending and structured finance investments in Marathon investment vehicles, including separate accounts. Edward joined Marathon from Citigroup Corporate Investment Banking, where he specialized in asset-backed debt financings in the firm’s financial institutions group. Previously, he worked as a quantitative researcher at Morgan Stanley Capital International. Edward holds a B.S. in Operations Research and Financial Engineering from Princeton University.
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Fund shares are illiquid and therefore an investment in the fund should be considered a speculative investment that entails substantial risks. An investor could lose all or substantially all of their investment. Shares of the fund are not listed on any securities exchange and it is not anticipated that a secondary market for the fund’s shares will develop. Thus, an investment in the fund may not be suitable for investors who may need the money they invest in a specified timeframe. The amount of distributions that the fund may pay, if any, is uncertain. Annual distributions may consist of your original investment, all or in part, and therefore may not consist of a return of net investment income. The fund’s use of leverage may not be successful and may create additional risks, including the risk of magnified return volatility and the potential for unlimited loss. Exposure to investments in commercial real estate, residential real estate, transportation, healthcare loans and royalty-backed credit and other asset-based lending, including distressed loans, may also subject the fund to greater volatility than investments in traditional securities. Investments in distressed loans are subject to the risks associated with below investment-grade securities. In addition, when a fund focuses its investments in certain sectors of the economy, its performance may be driven largely by sector performance and could fluctuate more widely than if the fund were invested more evenly across sectors. The fund’s investment strategy may not produce the intended results. Please see the fund’s prospectus for additional risks.
Request a prospectus from your financial professional, by visiting jhinvestments.com, or by calling us at 800-225-5291. The prospectus includes investment objectives, risks, fees, expenses, and other information that you should consider carefully before investing.