Private Debt

Purpose-Built for Private Debt

According to Preqin, private debt exceeded $100 BLN assets under management at the beginning of 2020. What was arguably the youngest asset class in private markets, now exceeds Infrastructure and Natural Resources as an asset class.

Over 4,100 investors around the world make allocations to this asset class. Demand has given rise to a record 1,764 fund managers now active in the space – up from 1,604 at the beginning of 2019 and over twice as many as five years ago – and a significant pool of capital available for them to put to use.

That said, challenges are here. This is where managers will want to provide more transparency around investment decisions, to convince stakeholders of the value the asset class can deliver even if there are difficult times ahead. Areas where private debt investors are prioritizing data technology efforts:

Private Debt Data Challenges

Risk Exposure

Most investors have a diverse debt offering across multiple strategies including: direct lending, mezzanine, special situations, distressed, and fund of funds. This increase in complexity will continue to put onerous data demands on fund managers to track underlying holdings from origination to divestment.

Covenant and Compliance Tracking

Concerns about loan covenant standards are growing. The “covenant lite” loans of the past have disappeared. Competition in the market has forced private lenders to make concessions to secure higher yields for their investors. It is critical for debt managers to prioritize efforts in tracking each debt covenant across each loan and portfolio.

Greater Focus on ESG

A key driver of the push towards ESG integration for debt managers has been the growing realization that ESG failures will have a material impact on a company’s credit quality. Private debt investors are moving away from glossy anecdotal case studies to a quantitative data intensive method to mitigate credit risk.

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