Asset managers respond to more demand for private debt liquidity
Asset managers are increasingly prioritising liquidity in their private debt products in response to investor demand.
Several key players in the private credit investment space have recently spoke out about the growing need for more liquidity in what has traditionally been an illiquid investment product.
In its 2024 investment outlook, Goldman Sachs Asset Management noted that secondary markets are increasingly being used by both limited partners (LPs) and general partners (GPs) in need of liquidity or capital solutions across their private credit investments.
Read more: ‘Megatranche’ private credit loans on the rise
“Secondary markets allow GPs to provide liquidity for their investors and extend hold periods for prized assets in aging funds,” explained Harold Hope, global head of vintage strategies at Goldman Sachs Asset Management.
“Structured secondary market solutions, such as preferred equity, also are being considered by both LPs and GPs who need liquidity but seek to maintain long-term exposure to their portfolios or assets.”
Meanwhile, recent fund launches are coming with built-in liquidity.
Last month, M&G Investments unveiled a new fund targeting opportunities in the private credit space.
The M&G Corporate Credit Opportunities strategy has been described as a “semi-liquid private credit proposition” which is made up of both syndicated loans and direct lending opportunities and offers quarterly liquidity.
Michael George, the fund’s manager, told Alternative Credit Investor that 90 per cent of his investor meetings now involve answering questions around liquidity.
“[Investors] like the fund because the alternative is locked up capital for up to eight years, and especially for the wholesale investor base, that just doesn’t really work for them,” said George. “So having a semi-liquid proposition like this, giving them a diversified product and access to an asset class that they didn’t have before with some liquidity works for them.”
At a conference in November, Blair Jacobson, the co-head of European credit at Ares Management told Bloomberg that “the real focus for us now is absolutely on liquidity,” in another sign that the market is adapting to both the macroeconomic environment and investor needs.