The dawning of the digital era

Individual access to private markets took a big step forward earlier this month when KKR, working with digital assets securities firm Securitize, offered tokens in its latest $4 billion healthcare-focused private equity fund. The tokens can be sold on a Securitize-managed secondary market just one year after purchase.

While this was the breakthrough fund, sources we speak to in the private debt market express the view that, for their asset class, the implications may be even more significant than for private equity. In today’s ‘risk off’ environment, they say, retail investors are wary of committing themselves to private market products that have the potential for significant losses.

While private equity currently provokes a nervous reaction in some, private debt is seen as an asset class offering relative safety with the potential for upside. Moreover, it’s seen as a more liquid option thanks to the yield component. Investors may like private equity’s promise of a 20 percent return; but they may find waiting 10 years to get their hands on it rather less enjoyable.

Most private debt managers are still of the good old-fashioned “analogue” variety, but one source says he detects a trend towards “creeping digitalisation” as managers begin to appreciate the enormous fundraising potential of the retail channel and the need to make it easier for such investors to gain access.

However, the view is also expressed that private debt could do with a hand from the regulators, who are accused of lumping together private debt and equity in their definitions and hence creating a high barrier to entry. With acknowledgement that consumers of course need protecting, private debt managers we spoke with believe the regulators could nonetheless operate with a lighter touch and offer more simple onboarding processes for investors.

In response to the topic having become a major talking point, a panel on the ‘Democratisation of the Corporate Credit Market’ will form part of the day one agenda at our PDI Europe Summit 2022 in London on 11-12 October. The panel will have representatives from Bite Investments, CrossLend and Decalia Asset Management bringing their expert knowledge of the trend. Make sure you’re there to find out more!

Write to the author at andy.t@peimedia.com