April 8, 2019
Private Credit Exposure: A New Trend in the Private Markets
The Hamilton Lane Private Markets Survey noted that compared to 2017, LPs have increased their private credit exposure.
To get a better understanding of how LPs are positioning themselves within the private markets, we’ve turned to the Hamilton Lane Private Markets Survey. The Hamilton Lane Private Markets Survey provides unique insight into the private markets landscape. In fact, it surveys a few of the most influential practitioners in the space.
As the chart below highlights, more LPs have increased their allocation to above 10% of their total portfolio. In fact, over ninety percent of respondents indicated that they will either increase or maintain their current allocation to private credit over the next year or two.
My current allocation to private credit is:
My allocation to private credit strategies in the next year or two will:
Source: Hamilton Lane Private Markets Survey, 2018/2019*
Considering that private credit exposure is on the minds of LPs, we’d like to take a quick step back to provide an overview of the strategy. Over the past few years, changes in government regulation have led to substantial growth in the private credit asset class. Investors are increasingly interested in private credit investment opportunities as the strategy may alleviate some of the challenges faced by today’s investors. J-curve mitigation, current income and lower risk can be characteristic of private credit. Today, GPs are investing across a wide range of credit sub-strategies, each of which has its own unique risk and return profile. Some of the most common sub-strategies that we’ve seen include senior debt, mezzanine, distressed debt and restructuring/turnaround.
With a plethora of options for private credit exposure, it can be challenging for LPs to determine which strategies and managers are best for them. Using a technology solution, like Cobalt LP, can streamline this process for LPs allowing them to:
- understand how historic private credit funds have performed
- compare private credit performance to the public markets
- understand what new opportunities are out there.
- evaluate current private credit allocation
- benchmark current private credit investments to the market