Private debt

As market conditions turn, private debt is expected to lead the charge of private capital disbursement across the globe, with special purpose vehicles increasingly at the heart of deals according to a new study.

As the world of private capital expands, and advisers depend on it more as an alternative diversifier, one group has questioned whether advice clients know enough about it and if more education is required.

Market forces and changing winds in the banking sector have supercharged private credit, which is growing faster than any other arm in private capital. For advisers, that might mean reassessing which portfolio sleeve it slots into.

It’s been lauded as anything from a ‘”short-term fad” to the next great diversifier, but while private credit polarises investors it continues to provide robust, stable returns. Are private credit managers good enough to maintain their rapid ascension in the private capital arena?

While private credit is experiencing growing pains in some major markets, its rise continues apace back home with Regal Partners making another significant acquisition in the sector.

Real estate credit funds have firmed as an attractive source of alternative returns in the past few years. What matters, however, and what doesn’t, for these non-bank private credit lenders, has largely been left unexplored by investors.   

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.