New information has revealed that personal debt buyers are more and more trying to asset-backed lending as essentially the most promising rising technique over the subsequent 12 months.
Preqin’s Investor Outlook for the second half of 2024 revealed that 58 per cent assume asset-backed lending presents the most effective alternatives over the approaching yr, whereas non-public debt secondaries are gaining recognition, with 37 per cent of respondents telling Preqin they present essentially the most promise.
Nevertheless, direct lending stays essentially the most favoured non-public debt technique, with 70 per cent of respondents saying it presents the most effective alternatives. It has held the highest spot since 2021.
Learn extra: Rising bifurcation between higher- and lower-risk non-public credit score issuers
Particular conditions changed distressed debt because the second most favoured technique since final yr’s survey, however Preqin vp and head of personal debt and costs RJ Joshua factors out that the 2 methods have some similarities and “have merely traded locations”.
He famous that sentiment towards greater returning, greater threat, methods corresponding to distressed debt and mezzanine is down barely in comparison with the earlier yr, implying that buyers have gotten extra threat averse.
“A key development that we’re watching intently is the regular features in investor curiosity in open-ended funds,” stated Joshua. “The clear majority of buyers proceed to favour the normal pooled single-manager fund construction, with 58 per cent of respondents saying they’re focusing on this construction within the subsequent 12 months.
“Nevertheless, curiosity towards co-investments has markedly elevated, from 19 per cent in June 2023 to 26 per cent this yr, in addition to open-ended buildings, from 16 per cent to 23 per cent. Each buildings profit from permitting buyers faster publicity than conventional closed-ended funds, as they don’t have to step by step draw down capital to construct publicity, which can clarify the rise in curiosity.”
Learn extra: Cost-in-kind earnings more and more greater for funds
Total, sentiment in the direction of non-public debt stays exceptionally excessive, 50 per cent of respondents stated they wish to add capital to personal debt within the subsequent 12 months and 42 per cent stated they are going to keep their positions.
Dependable earnings is overwhelmingly the primary purpose for buyers to allocate to personal debt, cited by 58 per cent of respondents.
Diversification (57 per cent) and excessive risk-adjusted returns (44 per cent) have been additionally cited as essential. As many as 86 per cent of respondents stated non-public debt had both met or exceeded expectations, though this down over the past 12 months, when the determine was 90 per cent.
Learn extra: International non-public debt fundraising hits $50.4bn in Q2