Asset AllocationSeptember 21, 2016

Preqin: Private Debt Becoming ‘Fixture’ in Portfolios

More than two-thirds of surveyed investors planned to grow their allocations to the asset class over the long term.

Reported by Featured Author

Investors plan to up allocations to private debt, citing high satisfaction with the asset class’ performance, according to Preqin’s latest survey.

Of more than 160 institutional investors surveyed, 67% indicated they would increase their commitments to private debt over the long term. The majority of survey respondents said they viewed the asset class positively; just 9% held a negative view.

“Having once been considered a niche part of the alternative assets market, the private debt industry is continuing to cement its position as a fixture in many investors’ portfolios,” said Ryan Flanders, head of private debt products at Preqin.

Private debt investments have largely met or exceeded investor expectations, the survey found, with 84% of investors reporting satisfaction. Over a quarter (27%) said their confidence in private debt’s ability to achieve portfolio objectives had increased over the last year.

“The recent performance of their private debt investments has met or exceeded the expectations of most investors, and as a result, the general perception of the asset class is currently very positive,” Flanders continued.

Although the majority of respondents still invested in the asset class through their private equity allocations, the number of investors with independent private debt allocations is slowly growing. According to Preqin, 12% of investors had separate buckets for the asset class, compared to 11% six months ago.

Nearly two-fifths (38%) remained under their target allocations, and almost half (46%) planned to commit more capital to the asset class over the next year.

When making those commitments, investors said fund strategy was the most important factor to consider, followed by track record length and past performance.

Of private debt strategies, respondents favored direct lending, mezzanine, and distressed debt. They primarily targeted investments in North America and Europe.