US private debt an untapped opportunity

US private debt an untapped opportunity

Institutional investors should consider US private debt as an alternative investment strategy to obtain higher returns, says Churchill Asset Management.


According to Churchill Asset Management, US middle market private debt presents Australian institutional investors with an opportunity to achieve higher returns than traditional fixed income.

Churchill Asset Management president and chief executive Kenneth Kencel said: “Market forces have combined to create a substantial shortage of capital supply for this market and so we’ve moved quickly to fill this gap.”

Mr Kencel said that in terms of GDP, the US middle market company sector is equivalent to the world’s fourth largest country.

“At a moment when interest rates remain low and public equity and credit securities seem fully valued, the investment opportunities in middle market loans are compelling.

“Australian institutional investors, like their international counterparts, are looking for diversification and a way to access attractive yield without compromising their risk position.

“Secure middle market loans can offer investors what we call a ‘triple crown’ of a yield premium over broadly syndicated loans, lower leverage and higher coverage ratios and more conservative deal terms and covenant packages,” Mr Kencel said.

Shai Vichness, middle market asset manager TIAA-CREFF, head of senior leveraged lending, said the market provides a “compelling” source of income.

“US middle market companies are the growth engine of the US economy and this sector’s appetite for capital presents a unique opportunity for institutional investors ready to explore it,” he said.

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