Pathlight’s latest ABL close underscores private-credit pull as managers chase secure, floating-rate yields

Pathlight seals Fund IV and second Evergreen tranche, raising $1.9 billion — and sending a clear signal to private-credit markets

Pathlight Capital said it has completed a final close of its fourth asset-based lending fund and a second Evergreen tranche, gathering a total of about $1.9 billion in commitments. The dual close supplies fresh capital to make secured, asset-backed loans to middle-market borrowers and arrives at a moment when many institutional investors are hunting yield in private credit. For fund-raising, the deal matters because it shows continued appetite — from pensions, insurers and other long-term allocators — for ABL strategies that offer floating-rate income and collateral protection.

How Fund IV and the Evergreen tranche will deploy capital: ABL focused and practical

Both vehicles target asset-based lending, meaning loans secured by tangible company assets such as receivables, inventory and equipment. Fund IV is the traditional closed-end vehicle that will make loans across the U.S. middle market, with a vintage and investment horizon consistent with a typical private credit fund lifecycle of several years of deployment followed by multi-year repayments. The Evergreen tranche is a more flexible, open-ended sleeve designed to stay invested and recycle capital, giving LPs a way to keep exposure without waiting for a full fund wind-down.

The sponsor frames the strategy around conservative underwriting: smaller senior-secured facilities, short-to-medium term maturities and regular covenant protection tied to the borrower’s assets. That profile tends to produce floating-rate yields that track short-term interest rates, offering investors a cushion when rates rise. Pathlight positioned the vehicles to serve companies that need working capital lines, capital for buyouts or balance-sheet flexibility — borrowers that benefit from speed and collateralized structures rather than large unsecured loans.

How the $1.9 billion was put together: structure and investor mix

Pathlight’s announcement describes a final close — notably paired with an Evergreen tranche — rather than a single oversized closed-end fund. The closed-end Fund IV takes traditional capital commitments with a defined investment period, while the evergreen sleeve accepts rolling capital and can support revolving facilities and refinancings. That dual-structure lets the manager balance the predictability of a classic fund with the ongoing demand from allocators who prefer evergreen access to a replicable credit strategy.

While the release did not publish a hard cap or full LP roster, Pathlight said the pool reflects commitments from a mix of institutional investors typical for the space: public and private pension funds, insurance company accounts, endowments and family offices. Placement dynamics were described in standard terms: the firm worked with institutional distribution channels to target long-term allocators seeking secured, floating-rate credit exposure.

Why ABL is drawing capital now — rates, bank pullback and the search for downside protection

The timing of this close tracks broad shifts in credit markets. Banks have stepped back from some areas of middle-market lending in recent years, opening market share to non-bank lenders. At the same time, higher short-term interest rates have made floating-rate private credit more attractive: as base rates move up, coupons on many private loans rise with them. That combination — widening demand from investors for variable-rate income and a supply gap left by traditional banks — is fertile ground for asset-based lenders.

ABL strategies add an extra layer of appeal because loans are secured by assets that can be liquidated if a company falters. In uncertain economic stretches, that collateral component helps limit downside loss and can improve recovery rates compared with unsecured lending. Managers who can underwrite conservatively and move quickly are seeing steady demand from investors who prioritize both yield and protection.

What this means for rival managers and for borrowers

For other private-credit firms, Pathlight’s successful dual close is a reminder that capital remains available for well-run ABL shops. That will intensify competition for high-quality deals, which could nudge terms tighter in pockets where deal flow is ample. For borrowers, increased liquidity from committed private-credit pools should keep financing options open, but they may face firmer pricing and covenant scrutiny as lenders compete for the best credits.

At the market level, strong fund-raising for ABL could modestly compress spreads over time for seasoned managers, while rewarding operators who can deliver stable underwriting and low-default track records. The practical consequence: managers with strong origination channels and asset-focused expertise may find fundraising easier, while newer entrants will need to justify higher returns or niche differentiation.

Manager comments and what investors should track next

In its announcement, Pathlight characterized the raise as evidence of persistent investor demand for secured, floating-rate private credit and signalled that capital will be deployed into loans for middle-market companies needing asset-backed financing. The firm framed the Evergreen tranche as a response to LPs seeking ongoing access to the strategy.

Investors watching this story should track a few things: how quickly Fund IV and the Evergreen tranche are deployed into loans; the average loan size and borrower industries targeted; portfolio seasoning and default metrics; and whether other managers respond with larger ABL raises or new evergreen products. Those indicators will show whether this close is a single data point or part of a broader shift in private-credit allocations toward secured lending.

Primary source: Pathlight Capital press release (PR Newswire), published Dec. 15, 2025.

Sources

• prnewswire.com