Private Debt’s silver lining despite a cloudy economic outlook
Raising around US$192 billion in funds in 2021 alone, global private debt is the only segment of private markets to deliver consistent annual growth for 10 consecutive years, including during the pandemic-marred 2020. While PE fundraising fell almost 20%, private debt grew by the same margin between 2019 and 2020, a McKinsey study shows.
Why is this? It’s largely driven by private debt’s more senior position within the capital structure versus equity. We saw this in the returns delivered by our listed debt fund in FY2021, which exceeded our target of the RBA cash rate plus 4%. And we’re confident our new Partners Group Global Income Fund – Unlisted will also deliver strong performance, even as the economic environment worsens.
The unlisted product is less dependent on daily market pricing, with plenty of deal flow available on a global basis amid senior loans. We think it makes a lot of sense for investors, particularly in the current environment.
Actively managing a broad fund of more than 200 individual senior loans, we focus on non-cyclical businesses that are less leveraged to the economic climate. And our emphasis on leveraged loans, and on those with floating rates rather than longer-term fixed rates, further decreases the loss rates compared to other parts of the credit universe.
With inflation and interest rates rising, traditional debt products – especially those longer-duration assets such as 10-year plus bonds don’t make sense, because their valuations will drop. But this environment is actually a positive for our products and provides a boost for our return profile.
Learn more about Partners Group Australia
Partners Group are one of the largest private markets investment managers in the world. To learn more about their recently launched Global Income Fund - Unlisted, please visit their website.
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