‘Massive opportunity’ for investment-grade private credit
Investors are identifying a major opportunity in investment-grade (IG) private credit, a historically overlooked asset class, according to Legal & General.
L&G said that some of the biggest public capital market participants are looking for “diversified financing, flexibility and high-quality partners” and may soon turn to private markets to find those solutions.
Read more: Private credit ‘compelling alternative’ to traditional fixed income in US
“Historically, IG private credit has been a favoured investment for US insurance companies seeking diversification through unlisted, high-quality debt assets,” it said.
“While this market segment has been outpaced by direct lending, investors are starting to identify a massive opportunity in high-grade debt. This is timely, as diversification in high-quality assets has become increasingly important with public indices becoming more and more concentrated”.
Read more: Building a private credit trading platform is the next chapter for the sector
In a recent Nuveen survey of 300 respondents, 52 per cent of institutional investors said they intended to increase their allocation to IG private credit in the next 12 months.
“Potential for enhanced return, greater diversification and built-in structural protections have fueled the demand from investors. With public spreads at historical tights, IG private credit remains a highly favoured arena for additional spread from highly rated assets,” L&G said.
Read more: Private credit now ‘mainstream’ in sovereign wealth funds
