From Consensus to Allocation
Market consensus is building around the idea that inflation and rates have peaked and a hard landing is unlikely. However, what credit investors seem less settled on is when, how, and where they should allocate.
This month, we make three key points:
01 | A Permanent Spot for Private Credit Private credit has earned its right to stay: Direct lending is becoming a mainstay in investors' asset allocations, as well as a regular tool in the toolkit for borrowers. This holds true even as syndicated markets reopen. |
02 | The Ship Has Not Sailed in Liquid Markets The ship has not sailed in liquid credit markets: Despite strong performance in 2023, we believe investors can still attain high levels of income with limited risks of outright losses, plus the added benefit of immediate deployment. Dispersion is likely to increase, making credit-picking increasingly important. |
03 | A Golden Age for Credit Allocation We are in a golden age of credit allocation: The tremendous growth private credit has experienced over the past decade has made a more diverse array of options available to investors. Asset-based finance, capital solutions, and Asia-Pacific credit markets offer a different risk-and-return profile and diversification to corporate private credit in developed markets. |
