Over the past few years, the private debt asset class has increasingly attracted investor attention due to a number of factors that have had a lasting impact on the credit market environment in particular.
Within the Eurozone, lending has been significantly reduced due to the legacy from the financial crisis in 2007/08. Additionally, increased capital requirements due to Basel III imply that banks are forced to reduce their lending-volume in certain areas. The resulting gap has been closed by so-called “non-banks”. These have taken over parts of the traditional lending business of the banks and have also launched investment vehicles that offer investors the opportunity to participate in their private debt portfolio.
Listed Debt companies are listed on a regulated stock exchange. A Listed Debt company provides shareholders an immediate exposure to a diversified private debt portfolio and exhibits the following characteristics:
Liquidity – Liquid exposure to the Private Debt asset class; no capital lock-up; no fixed investment horizon
Access – No minimum investment requirements in contrast to traditional Private Debt funds (limited partnerships); direct and immediate exposure to a diversified Private Debt portfolio; no j-curve effect
Transparency – Transparent Private Debt investment portfolio; listing involves high standards of disclosure
Diversification – High degree of diversification of private debt portfolio across regions and sectors
Cost – No transaction costs except for bid-ask spread; on average lower management fees compared with traditional Private Debt funds (limited partnerships)
Performance – Long-term outperformance of all major asset classes
Discounts – Depending on market environment, investors can buy at a discount to the fundamental value (Net Asset Value)