what is private debt?
Private debt, or direct lending, is an investment strategy where non-bank lenders (i.e. institutional investors, debt funds, insurance companies and private investors) provide loans (senior, mezzanine and other forms) to support the financing objectives and requirements of businesses, including growth, acquisitions and funding for developments.
Private debt was born from the 2008 Global Financial Crisis, which caused a structural shift in the supply and demand dynamics that governed lending markets at the time. The implementation of regulatory reforms increased costs and restricted credit appetites from banks which caused them to focus on core areas of the lending market and to retreat from others, especially in respect of loans to private companies in the small and mid-market segment.
In comparison to traditional fixed income, private debt can provide investors with robust security, higher yields, portfolio diversification and lower portfolio volatility.
Westbrooke Income Plus is a South African investment strategy that seeks to provide investors with an attractive cash yield in excess of that provided by the traditional fixed income funds.
The fund is focused on the generation of a consistent cash yield, by investing in a diversified portfolio of secured, senior or subordinated, interest paying credit investments with a focus on asset-backed and security-backed transactions.
Core to the Income Plus’ investment philosophy is capital protection. Investment opportunities are typically in the form of debt instruments with robust security packages, significant equity cushions and a clear path to liquidity.
key investment highlights
Compelling yields: targeting a net cash yield of Prime + 2.0% – 4.0% p.a (after fees, before tax) from predictable income streams
Asset diversification: across a portfolio of secured loan instruments with asymmetric risk / return profiles
Capital protection: derived through robust security packages, equity cushions and conservative leverage
Uncorrelated returns: private debt investments have a low correlation to comparable public market investments
Superior cash return: c.2x greater yield when compared to the traditional income funds
Track record: experienced investment team with a track record of performance