Private debt

In the near to medium term, the group forecasts “ample opportunity” in the loan asset class to generate higher than average returns while maintaining a minimal risk profile for investors.

As many as half of all Australian private lending managers are using leverage to juice their returns, according to Challengers Investment Management, exposing themselves and their investors to mark-to-market risk.

You don’t need the world to end to start investing in stressed and distressed debt, according to RBC BlueBay, but it helps. And what looks to be a multi-year uptick in defaults is creating plenty of opportunities.

A business may appear to be robust, but a savvy lender that is responsible for the capital of its investors needs to be constantly across the mountain of variables that can present themselves.

For non-bank corporate lenders that don’t have the regulatory oversight that banks do, using third party validation for loan books is essential according to Epsilon Direct Lending’s Joe Millward.

As the private credit market grows, so does the importance of due diligence when selecting an investment partner. Epsilon’s Joe Millward details the five things all potential investors should look out for.

Not all private credit providers are created equally, and due diligence is crucial for investors. But what separates the wheat from the chaff?

Senior secured loans recover strongly from economic downturns and plenty of corporates are well prepared for any ructions ahead. Still, active management matters when it comes to selecting new deals.

There’s still ample opportunity for loans generate higher than historical average returns, with Invesco expecting outperformance over the next 6-12 months. And with a recession potentially on the horizon they come with downside protection included.

Commentators warn that a new default cycle will strip the shine from private debt strategies, but not all managers have been “sitting on their hands”. And the dislocation in commercial real estate is creating new opportunities for savvy managers.

The mid-market private manager’s co-founding partner, Mick Wright-Smith, expounds on the biggest red flag borrowers can wave, as well as the lending advice he’d like to give to his younger self.

The proliferation of private credit providers in recent years is a boon for investors, explains Andrew Ash from Mason Stevens. But the attraction of diversification and returns comes with several caveats that investors should consider.