The case for private debt

Private debt proved its worth to institutional investors during a sustained period of benign market conditions. But what does the outlook look like in an altogether more challenging environment?

The private corporate debt market is a growing focus for institutional investors. Having delivered strong performance against a benign economic background, we look at the outlook for the sector in what could be a more challenging period, as well as the characteristics that make it a useful source of diversification for institutional portfolios.

COVID-19 is undoubtedly placing a strain on the balance sheets of many companies. In our white paper, ‘The case for private debt’, we consider the impact of the crisis of the crisis and the key considerations for investors when building resilient portfolios, including:

  • The diverse nature of private corporate debt as an asset class;
  • Current market trends and their impact;
  • The importance of entry points;
  • How the asset class stacks up against public alternatives;
  • The key considerations for portfolio construction.

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Key risks

Investment risk

The value of an investment and any income from it can go down as well as up and can fluctuate in response to changes in currency exchange rates. Investors may not get back the original amount invested.

Illiquidity risk

Where funds are invested in illiquid private assets, investors may not be able to redeem any units in the fund when they want because illiquid private assets may not always be readily saleable. If this is the case we may defer a request to redeem units.

Credit risk

Bond values are affected by changes in interest rates and the bond issuer's creditworthiness. Bonds that offer the potential for a higher income typically have a greater risk of default.

Except where stated as otherwise, the source of all information is Aviva Investors Global Services Limited (“Aviva Investors”). Unless stated otherwise any opinions expressed are those of Aviva Investors. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature. The investments mentioned within this video are intended to be for illustrative purposes and should not be considered as investment recommendation.

The information contained in this document does not constitute explicit or implicit actuarial advice.

Issued by Aviva Investors Global Services Limited, registered in England No. 1151805. Registered Office: St Helen’s, 1 Undershaft, London EC3P 3DQ. Authorised and regulated by the Financial Conduct Authority and a member of the Investment Management Association. Contact us at Aviva Investors Global Services Limited, St Helen’s, 1 Undershaft, London EC3P 3DQ.