The private credit sector has been growing quickly and not only in direct lending. Special situations, opportunistic credit, real assets credit and truly niche strategies offer different risk adjusted returns and require a different skill set to execute. In addition to the broad range of strategies, SME platform lending gives institutional investors a new way to diversify. So how should private credit be defined and how should LPs evaluate the different strategies on offer?
Hear from our panellists on:
- Which strategies are attracting the attention of institutional investors? How has this developed over the past 5 years?
- Should distressed debt strategies be included within a private credit allocation?
- Has SME platform lending added a whole second dimension to the private credit model?
- And ultimately, how do you define the asset class?
- Kelly DePonte, Managing Director, Probitas Partners
- David Bateman, Senior Managing Director, Harbert European Growth Capital
- James Newsome, Managing Partner, Arbour Partners
Our panel took time to answer some of the questions that were sent in live from the audience in the Q&A.
What is the appetite for private credit for telecommunication towers in sub Saharan Africa?
Investment in telecommunication towers in all geographies, either debt or equity, is usually made through infrastructure funds, not through general private credit funds.
What is the appetite for private debt for niche strategies within real assets such as mining and metals or timber? How does it fit into overall private debt allocations for institutions?
There has not been as much disruption in the bank market for loans targeting real assets which are usually collateralized by those hard assets. For that reason, there are very few debt funds targeting real assets, and it least one targets infrastructure debt as well as debt for real assets in order to reach critical mass.
Can you comment on emerging markets direct lending strategies? Have you seen LPs interest in these strategies?
There are very few debt funds focused on emerging markets, though there are a few debt funds focused on single countries denominated in local currencies. Most North American and European investors have little interest in the sector as they look for premium returns when investing in emerging markets to cover cross currency, economic and political risk – premiums not often found in debt funds.
Do institutional LP's tend to look for innovation in lending from new managers or existing managers with new initiatives?
Once an institutional LP has built up a certain core exposure to a sector of the market – such as European direct lending – they are then more likely to pursue new managers or new initiatives that can generate alpha