Where is yield?
Private credit funds provide income in a world starved of yield
Despite recent moves by global central banks to increase interest rates, we still live in a low yield environment that is far below long-term average interest rates. This has meant that obtaining debt and loans has been highly affordable for many, but the opposing consequence is that the ability to save has been made much harder for individuals.
As traditional banks step away from funding property and corporate assets, private funds have pounced upon the opportunity to provide credit. Often staffed by ex-banking professionals, private funds have gained a solid reputation for providing personal and bespoke financing solutions for asset holders that are unable to obtain finance from traditional lenders. The high interest rates charged by these private funds have presented a great opportunity for institutional investors, like pension funds and insurance companies, to obtain superior risk-adjusted income generation to sustain payments to beneficiaries and policy holders. Investors allocated $88.5 billion to private debt funds in the first half of 2021, [1]
Source: Data obtained 4 February 2022 from; Nomura, Dividenddata.co.uk, Worldgovernmentbonds.com, moneysavingexpert.com
We see a huge opportunity in making these funds more accessible for individual investors. For income seeking investors, either in employment or in retirement, the income returns / dividend yield offered by private debt funds are much higher than other publicly available forms of investing and saving.