Why you should invest in private debt

David Thornton

Livewire Markets

Investors in private debt are looking for stability of capital, first and foremost. 

But that doesn't mean investors are stuck with low returns. Private debt investments such as those offered by Metrics Credit Partners can include higher yielding debt, or debt where the fund takes an equity stake in the companies it funds.  

That said, higher returns don’t necessarily translate to higher risk. Here, scale and diversification is a private lender's secret sauce. 

In this wire, Andrew Lockhart from Metrics Credit Partners takes us through the reasons investors should consider private debt when making their fixed income allocations. Additionally, he'll explain how Metrics caters to investors with higher risk appetites, and also how scale can help with diversification.  

 

Key takeaways

Favourable loan terms and floating rates help preserve capital

When lending to companies, Metrics ensures most of its funds have floating rates, thus guarding against interest rate risk, and loan terms that favour the lender help ensure loans get repaid.

"The fees and interest that is charged to the company reflect the negotiating skill of the manager which provides a source of income for investors, and the regularity of repayment and servicing of the interest provides a source of income for the investor."

Fixed income can satisfy higher risk appetites  

"Our listed MOT, Metrics Income Opportunities Trust, or our wholesale fund, MCP Credit Trust, are designed to provide our investors with opportunities in higher yielding debt or equity interest in the company."

Scale has benefits

"As we've become larger, and our funds under management become larger, you're more relevant to the borrower, which means that the kinds of transactions you can originate are better for investors, and you can deliver higher returns for investors." 

It also helps investors avoid concentration risk. 

For instance, "If you're a manager who manages $100 million, and a borrower wants to borrow $100 million, you're not going to have one borrower in your portfolio. So one of the ways you manage credit risk is to ensure you have good diversification where you don't take significant exposure against any one borrower."

Looking for an alternative source of consistent income?

Metrics Credit Partners is a leading Australian non-bank corporate lender and alternative asset manager. Metrics seeks to provide regular and consistent income to investors through its portfolios of directly originated loans to Australian companies. Metrics’ team manage in excess of $10bn in funds from retail and institutional investors.

Visit our website or use the ‘contact’ button below for more information. 

Managed Fund
Metrics Direct Income Fund
Australian Fixed Income
LIT
Metrics Income Opportunities Trust
Australian Fixed Income
LIT
Metrics Master Income Trust
Australian Fixed Income

1 contributor mentioned

David Thornton
Content Editor
Livewire Markets

David is a content editor at Livewire Markets. He currently hosts The Rules of Investing, a half our podcast where he sits down with leading experts across equities, fixed income and macro.

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