Darien, CT – September 23, 2015 – There are five key takeaways from the maturing credit cycle and flood of institutional interest in all types of private debt strategies, writes direct lending specialist Old Hill Partners Inc. in its latest commentary. They are:
1) Private debt increasingly means different things to different people, with the majority of new institutional buyers concentrating on sponsor-based cash flow lending. At the same time, this market is considered relatively mature, making opportunities in asset-backed lending relatively more attractive.
2) New investors in the space are sophisticated and are discounting managers that do not bring managed credit and workout experience to the table.
3) Origination capability & management remains key to winning mandates. Peer-to-peer and online lending marketplaces will scale private debt, but large investors want managers with relationships able source attractive deals as well as the proper systems to manage them.
4) Large private debt investors are far more interested in where we are in the credit cycle than in the precise timing of the Fed’s first interest rate hike.
5) Proper benchmarking of the private debt industry remains a challenge. Several market participants are exploring synthetic blends of corporate loan indices, high yield measures and equity metrics, but debate about their accuracy rages.
At a macro level, Old Hill’s commentary reminds new investors in the private debt space that manager selection, approach and experience are key advantages that should not be overlooked.
“It takes time, years of experience and countless hours of analysis to consistently and successfully evaluate which deals should be pursued,” observed Old Hill Partners COO Jeff Haas. “As the credit cycle matures, these qualities are only going to become more important. Fortunately, we’ve been here before, and are thus confident in our methodology, our systems, and above all, our ability to continue generating attractive risk-adjusted returns for our investors.”
Building on these observations, Old Hill will co-host a complimentary panel entitled Private Debt: The Hunt For Yield in Greenwich, CT on November 12, 2015. Topics explored will include use of the due diligence, transaction structure and legal processes of a deal in order to mitigate risk. Attendance is free, but space is very limited. Please register by November 6.
About Old Hill Partners
Darien, CT-based Old Hill Partners, Inc. is an SEC-registered investment adviser with significant experience in asset-backed lending and alternative investment management. The firm offers customized lending products and services to middle market clients seeking creative funding structures for growth initiatives. The firm was founded by John C. Howe in 1996.