Private debt tops alt asset growth

A report from Willis Towers Watson notes the asset class has grown more than any other alternative asset category over the past 12 months.

Private debt is the fastest growing alternative asset class, according to a recent report from Willis Towers Watson. The global hunt for yield, paired with a greater acceptance of the asset class, is the catalyst for its increasing popularity.

According to Willis Towers Watson’s Global Alternatives Survey 2017, illiquid credit assets under management rose at a greater clip than any other alternative asset class by more than 100 percent, from $178 billion to $360 billion globally.

According to Chris Redmond, global head of credit and diversifying strategies at Willis Towers Watson, a lack of yield from conventional asset classes is driving investors towards private debt. “I think the global phenomenon of pension funds and insurance companies being starved of yield is pushing them to other things,” he told PDI.

Private debt is also being aided by a greater acceptance and understanding of the asset class, Redmond added. “Back in 2009, 2010 or 2011 clients didn’t have this as a ‘bucket,’” he said. “They were almost making an off-benchmark play into this asset class.”

Now, Redmond noted, investors are more willing to put aside an allocation to private debt. There is variation, however, in terms of what’s being sacrificed to make room for illiquid credit.

According to Redmond, investors in countries like Germany – where fixed-income holdings tend to be high – are selling core bond holdings to make room for alternative credit strategies. On the other hand, in the US, where alternative investing is more prominent, private debt slots into the alternative sleeve of many investors’ portfolios.