Private credit can deliver strong outcomes for investors even in uncertain markets, according to the chief executive of Metrics Credit Partners, an AUD$30bn Australian alternative asset manager.
Andrew Lockhart, chief executive and managing partner of the firm, said that investors are increasingly turning to private debt to “help safeguard their portfolios” as market conditions shift.
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“I’m a big advocate for private debt in investor portfolios. I think the attraction for investors in private debt is the stability of the capital, which primarily comes from the protections that a lender can take, such as the imposing of covenants and controls, and on the other hand, it is also delivering a very attractive income,” he said.
“Given most loans are based on a floating rate, as interest rates have risen, then obviously the total return to the investor has increased. But what we find is that in either markets where rates are going up or coming down, the excess return – the spread – that’s been able to be returned in the asset class is very attractive compared to other alternative assets.”
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Speaking about the future of the private credit market, he said that he thinks it will consolidate into larger, more sophisticated managers that are delivering good outcomes for investors.
“My guess is that over time, there will a consolidation of the market as investors gravitate to managers and to funds that are larger, more scalable, more diversified, are lowering their risk, delivering very attractive returns, but are doing it for a very competitive cost base as well.”
Read more: Private credit’s consolidation season
