November 2014 Issue

A maturing asset class, private debt continues to attract increasing volumes of capital from investors hoping to find steady, superior returns. But questions remain about risk. At PDI’s US roundtable in September, Anastasia Donde spoke to a group of fund managers and advisors about how the asset class reached the point where it is poised to earn a permanent home within institutional portfolios. While our experts were positive, the discussion inevitably also looked at the risks dogging the market.

Changes in regulation could affect how German insurance companies, in particular, allocate to private debt law firm Dechert’s Hans Stamm and Declan O’Sullivan talk German regulation and Solvency II with Anna Devine.

Oak Hill Advisors’ approach to credit investment is marked by painstaking analysis of all the data it can get its hands on. So whether it’s analysing US housing finance, getting to grips with lending in a specific European country or creating a bespoke investment strategy for a client, the firm digs into the detail. Anastasia Donde met with Oak Hill leadership in New York, and PDI also made a trip to the London office to find out the particulars.

SCIO Capital is an independent specialist in European structured credit founded in 2009 by former executives from Deutsche Bank and the Boston Consulting Group with a strong emphasis on risk management and monitoring of individual assets. In this commentary, Eriko Aron, a director in the risk management team, discusses the factors influencing structured credit in Europe and the opportunities in CLOs.

Active in direct lending in both the US and Europe for over a decade, Alcentra has a unique global franchise. Global chief investment officer, Paul Hatfield discusses opportunities and risks in direct lending with Graeme Delaney-Smith, managing director and head of European direct lending, and Paul Echausse, chief executive and president of Alcentra Capital Corporation.

When should a growth business use venture debt? Anna Devine looks at the recent financing for SafeGuard, a UK payroll company, in search for clues.

Asset allocators are faced with a wide range of investment choices to help meet their return targets in today’s low-rate environment. Capital preservation and predictable floating-rate income streams are why investors are looking at senior debt tranches of collateralised loan obligations (CLOs). Babson a variety of investors.

PDI’s Asia Columnist turns his attention to the Indian corporate debt market. Relaxation of capital restrictions by the Indian central bank has allowed foreign investors some exposure. Our man in Asia argues the case for expanding the availability of foreign debt to India’s credit choked corporates.

Pension plans have increasingly been allocating to private debt funds over the last few years, as evidenced by data collated by PDI’s Research & Analytics division. Now insurance companies appear to be following suit in what BlackRock has called a ‘great migration’. Infrastructure debt and commercial real estate debt are flagged as two key areas set to benefit from the expected influx. Anna Devine reports.

In early October, Mario Draghi, president of the European Central Bank (ECB), clarified some of the detail around the central banks’ planned asset buying programme, including information on the qualifying criteria for asset-backed securities (ABS) and covered bond purchases. Later in the month, leaked information suggested that the ECB was considering adding corporate bonds to the pool of assets included in the quantative easing plan. Rachel McGovern asked private debt practitioners what this means for non-bank lenders and the smaller European corporate borrowers still struggling to finance themselves.