LPX launches index to track direct lending

The DLX will track direct lending activity by listed companies and shows the asset class offers superior returns to other benchmarks.

Alternative asset research and index provider LPX Group has launched a new index for listed private debt.

The Direct Lending Index is intended to serve as a standard benchmark to track performance of listed companies that provide debt capital to unquoted companies. The index is based on a total of 41 companies identified worldwide with a total market capitalisation of $56.5 billion, with the majority being based in the US.

The DLX tracks performance since 2009 and shows listed direct lending providers delivered an annualised geometric mean return of 10.46 percent and a standard deviation of 21.41 percent. This compared with the MSCI Financials returns of 6.31 percent and 19.07 percent standard deviation over the same period.

Dr Michel Degosciu, co-founder and managing director of LPX, said: “Since the global financial crisis, private debt has become its own asset class for investors, driven by attractive post global credit opportunities and as a lucrative alternative to the low yields observed within traditional fixed income and credit markets.

“Investors’ access to this market was nigh-on impossible previously as it is a notoriously challenging one to track – a niche market without any standard definitions. This DLX Direct Lending Index overcomes this for investors, broadening investor access on a systematic basis that allows them to benefit from this burgeoning asset class.”

LPX said the index has a high risk-adjusted return on average and low correlation to traditional equity markets. Stocks listed on the index have a relatively stable dividend yield of 8.93 percent on average between 2009 and 2021.