According to Mercer’s Kylie Willment, Australia’s private debt market is an underexplored investment opportunity that can reward long term investors. She notes that the conditions that shaped private debt markets in the US and Europe some 20 years ago are beginning to play out here. At the same time, dry powder in the private equity space is fuelling the need for debt to be deployed alongside this capital and hence creating an opportunity for institutional investors.
The appeal of private debt funds is that they tend to have a buy-and-hold approach, meaning lower volatility than equivalent public market debt. For investors with a longer-term investment horizon, its illiquid nature tends to equate to higher yields. Industry figures from March this year show private debt yields ranged between 6 per cent and 17 per cent.