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Through a turbulent 2020, resiliency across Private Debt
portfolios cemented the asset class as an all-weather investment.
With the onset of COVID, Private Debt has seen extended hold
periods increasing MOIC and yield in all but the most competitive
deals, collaboration between sponsors and lenders to support their
underlying Portfolio Companies, and attractive risk-reward profiles
as funds continue to increase allocation to illiquid debt
strategies across the globe.
Over the past two weeks, SuperReturn North America and Private
Debt Investor New York featured perspectives on Private Debt from
hundreds of GPs and LPs alike in a virtual forum. Panelists across
conferences expressed their outlook for the balance of 2020 and
early 2021 for the private markets. The outcome of the crisis is
still uncertain, yet investors are excited about opportunities to
deploy capital on a global scale. We sat down with our industry
experts to highlight our top 10 takeaways from the conferences for
the immediate future:
COVID-19 has created an economy of haves and have nots -
competition is strong for critical service providers while industry
avoidance for those still challenged by crisis remains high.
Lenders with strong relationships throughout the sponsor and
intermediary communities believe they have a competitive advantage
in this environment, as evidenced by the rebound in their deal
pipelines.
Technology allows firms to mine information from portfolio
companies and third party data to better understand their
portfolio, associated risks and the overall market environment to
make more informed decisions; this is a competitive advantage
during a market dislocation.
LPs are finding direct opportunities via their GP relationships
and enjoying an attractive risk-reward on those investments.
ESG-focused investing continues to be a focus, however,
reporting can be challenging.
Opportunities proliferate in Europe as the banking community
has retrenched even further from lending to the LMM & MM;
Strategic capital funds are flowing toward the space.
Opportunistic deals are prevalent in the US as the market
dislocation continues to present attractive investments for various
risk profiles - with active portfolio management and tighter
documents a recurring theme.
Global economic uncertainty remains prevalent, however
collaboration among management teams, sponsors and lenders has
worked well for solving liquidity issues and insolvency remains low
to date.
Many believe the tail for this recessionary period will be
longer than that of the GFC due to the systemic impact of continued
economic uncertainty and changes in consumer behavior.
Economic policy and government support for enterprises severely
impacted by COVID-19 remain of particular interest, predominantly
in the US with some states seeing a surge in cases coupled with the
looming presidential election.
In summary, lenders with access to capital, a strong foundation
of relationships and technology supporting their operations are
well positioned to take advantage of present and future
opportunities within Private Debt. Sentiment across both
conferences was that this vintage of investments will continue to
be attractive and terms will continue to be favorable for the
lender community.
Posted 30 September 2020 by Jocelyn Lewis, Executive Director, Private Debt Strategy, Financial Services, S&P Global Market Intelligence
IHS Markit provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.
