RE private debt investors less worried
In the face of ongoing high market volatility, investors with money in private real estate debt are more optimistic than those invested in equities, according to alternative investment platform provider AltX.
Its observation was that while returns in listed equities remained higher so were the risks, while private debt investors had better visibility of their risk because they were lending directly to borrowers and could use loan to value ratio (LVR) factors.
They could also better track borrowers’ exit strategy to assess the risk of their investment in case it was not performing, not to mention benefitting from a buffer insulating private investors from market falls.
At the same time, given the availability of accessible data to so many people, the equity markets were often driven by ‘animal spirits’, where prices could fall rapidly and sharply, without logical explanation, on top of the exposure to disasters such as the recent pandemic.
On the other hand, private debt offered investors an opportunity to diversify their portfolio with an asset that had a low correlation to other investments and provided more certain returns in an unpredictable market.
“So, even when markets turn volatile the product is designed so that you should continue to receive consistent returns. And that’s reassuring if you rely on a regular income to maintain your lifestyle,” the firm said.
“If you’ve been procrastinating, perhaps now is a time to review your asset allocation and consider looking beyond traditional asset classes. Private real estate debt can be a valuable addition to a more stable, reliable, and less volatile portfolio.”
AUTHOR
Oksana Patron
Recommended for you
Fund managers may be operating in a squeezed environment, but a salary guide shows they are willing to pay up for specialist talent to diversify their fund range.
Reach Alternative Investments has entered into a strategic partnership with Russell Investments to bolster its wholesale private markets offering for financial advisers and investors.
Boutique investment consulting and research house Genium Investment Partners has announced a senior appointment to drive further growth in its research ratings business.
Nuveen has appointed a global head of estate, a successor to Chris McGibbon who steps down after almost 25 years.
