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Asset Class Introduction: Semi-Liquid Evergreen Private Credit

The Author
Patrick Reid, CFA Managing Director, Private Markets Distribution
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Private Credit

The Private Credit session compares investments in floating rate private credit loans and fixed rate public bond markets. Learning Objectives:

  • Understand the differences in risk and return by investing in public and private credit, as well as fixed and floating rate investments
  • Discuss the range of private credit investments, including business development companies (BDCs), direct lending, mezzanine, distressed, specialty finance, real asset credit, bridge financing, and special situations.
  • List the risk, return, and liquidity characteristics of private credit, including the portfolio construction implications of funding allocations from equity, investment grade, and high yield debt
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Asset Class Introduction: Alternatives

The term “alternative investments” is broad and, in our view, not particularly descriptive or useful. It encompasses all strategies that cannot be accessed through traditional equity and fixed income solutions. These strategies have the potential to address many of the challenges that investors face today—the need for enhanced income, inflation protection, diversification, and stability amid volatile markets.Read More

In particular, the wealth management segment is fast emerging as a key private markets growth area. McKinsey projects that private markets allocations will comprise 3-5% of U.S. wealth management assets by 2025 from 2% in 2020, a rise of $500 billion to $1.3 trillion in assets. Investor requests for increased liquidity and accessibility has been an increasingly important feature of the alternatives’ quiet but steady take-off in the wealth channel.

Key Takeaways

  • Innovative fund structures in private markets have opened the once closed door to alternatives investing to the intermediary and wealth management channels.
  • These structures, known as semi-liquid funds, offer a number of key advantages for wealth investors with features designed to meet their unique liquidity, risk and performance needs.
  • In our view, private credit is an asset class that exhibits essential liquidity, diversification and valuation features that are well suited to a semi-liquid fund structure.
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