Private Debt is an alternative to traditional financing channels, such as bank debt or corporate bond issuance.
In 2023, the private debt market represented approximately $1,500 billion, with a CAGR growth rate of 10% over the past decade. The expansion of private markets and the withdrawal of banks from financing LBO transactions has driven the growth in the private credit market.
How does Private Debt work?
Financing is granted by private investors including investment funds and institutional investors.
Companies which receive financing are usually private (often owned by a Private Equity fund) and have little or no access to the public markets.
Financing is used for different purposes including M&A activity, debt refinancing operations (LBOs) or to driving a company’s growth.
Private Debt funds distribute income to investors from underlying loans. In this case, investors receive a return on their investment from the fund’s inception.
The Private Debt market offers a wide choice of sub-strategies, allowing investors to gain exposure to the asset class with a degree of risk corresponding to their objectives and constraints, taking into account in particular the illiquid nature and the long-term maturity of these investments.
Why invest in Private Debt?
The Senior Private Debt market offers “Senior Secured” loans, which are senior in the capital structure and backed by the company’s valuable assets. These loans have first claim on assets in the event of a default resulting in a higher recovery rate than a traditional corporate bond, hence a lower loss rate.
Private Debt is a predominantly floating rate asset class. Thus, the coupons offered by the loans increase with key rates, providing a natural protection against inflation.
The floating rate component of private debt is a powerful diversification tool and complementary to traditional fixed income allocations.
Why choose BNP Paribas Wealth Management for your Private Debt investments?
- Draw on the expertise of BNP Paribas Wealth Management’s dedicated team of Private Debt specialists.
- Gain unique access to Private Debt funds that are usually reserved for institutional investors.
- Benefit from a tailored asset allocation of your wealth thanks to a selection of funds among the top-performing Private Debt managers in the world.
- Leverage on the benefits of an international platform of experts with a proven track record since 1998.
