As the private debt market emerged as a new frontier for credit investors in their search for yield during times of uncertainty, it’s no surprise that not all private debt strategies are the same. With lower quality credit being mispriced, this will come under more pressure in the next twelve months as we anticipate a further slowdown in the economy and a lift in unemployment. However, disciplined private debt portfolio construction will take into account all elements of the cycle to provide opportunities and mitigate risk for long term investors.
According to Simon Petris, Senior Portfolio Manager, we prepare every single one our investments to be able to withstand a very severe recession. We favour non-bank lenders that have been through multiple cycles and have the experience to deal with the upheaval. We’re trying to go into every investment with a large margin of safety so if the realised outcome for the economy is nowhere near our worst-case stress test then all our investments sail through easily.