PIMCO President Christian Stracke is upbeat on the asset-based finance segment of the private credit market, but warns of "cracks" in corporate direct lending, which makes up the bulk of the sector.

Speaking with CNBC's Chery Kang at the annual Milken Asia Summit in Singapore Wednesday, Stracke highlighted the widening gap between the two lending spheres.

"There are problems [in corporate private credit] where borrowers are going to their lenders and saying, 'Can I not pay you cash interest now, but basically borrow the interest from you and pay it later?' It's called Payment-in-Kind [PIK], and it's fairly prevalent right now," Stracke said.

Balance sheet divergence

He referred to asset-based financing as a "much healthier" credit environment.

"In asset-based financing — residential

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