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Private debt delivers calm waters in storm of volatility

Private debt is gaining popularity among investors as it offers a reliable income stream in volatile markets. Private credit strategies provide certainty of returns through seniority, contractual cash flows, and negotiated downside protection. In the second half of last year, private debt funds performed well, inspiring confidence in the asset class. Compared to the decline in the MSCI World Index, private debt funds achieved a one-year IRR of 5.3%. The strategy continued to perform strongly, with a 0.4% gain in Q4 2022, on par with real estate as the third-best-performing private capital strategy. Tightened lending conditions have increased the demand for debt financing, creating opportunities for private debt managers. The retreat of bank lending has allowed private-market loans to flourish, with private debt funds financing more leveraged buyouts compared to the broadly syndicated loan market. Mezzanine financing is also becoming more prevalent due to limited access to senior debt. More money managers are entering the private lending space, as evidenced by TPG's acquisition of Angelo Gordon and other investors buying credit managers. The private credit market presents opportunities for investors to raise funds and lend in private markets.


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