Mounting regulatory requirements for bank lending are forcing institutional investors to seek new investment opportunities in special niches via fund structures. What is more, new approaches are being taken to asset and investment allocation – not least of all against the backdrop of the protracted low interest rates – in response to changes in the range of investment openings for institutional investors.
This is increasingly pushing private debt as an asset class, a common form of investment in the Anglosphere, into the limelight for German investors as well.
The term “private” in “private debt” means that the debt is not publicly traded. This form of finance is not provided by banks but by non-banks such as funds, pension funds, insurance companies and family offices. Alternative, non-liquid investments are expected to generate more attractive returns, more stable cash flows, greater opportunities for diversification and lower portfolio correlation than comparable exchange-traded bonds. The greater complexity in structuring private-debt investments also fetches a premium on conventional fixed-income instruments.
Private debt as a form of investment is not structured, meaning that it comes in many different flavours. There are a number of forms, such as senior debt, junior debt, mezzanine debt in the form of hybrid debt/equity finance as well as distressed debt for funding companies in crisis situations.
Investors require experts who are able to identify and acquire these loans as well as evaluate, structure, manage and monitor the resultant risks. These experts must be able to rely on long-standing, mutually trusting relationships with investors as well as the companies they finance.
We are ideally positioned to achieve this.