Private Debt Is The All-Weather Asset Class
In 2022, when nearly all Stock and Bond indexes were down by -15 to -25%, our preferred Private Debt funds were largely unaffected, with the largest drawdown being -0.5% in 2022. The beauty about Private Debt is that there's only one thing that has negative impact on it: corporate defaults. And it turns out that not going bankrupt is a pretty low bar, even during recessions and bear markets such as 2022 and early 2020. Even in the case of a default, recovery rates average 65%+, meaning if we had a severe recession and corporate defaults reached 6%, you'd still only see a realized loss of -2%. Due to its resiliency during recessions and bear markets, Private Debt has been coined the "All-Weather Asset Class".
Original Source: Koyfin.com, retrieved 6/2/2023.
GDP Growth, Revenue Growth, & Earnings Growth Not Required
In order for Stocks & Equities to appreciate in value, the underlying companies need to grow profits and/or revenues (with the expectation of future profits). For Private Debt, that factors largely don't matter. If a company's profits decline by 50%, that stock is likely to tank 50%. But even though that company is less profitable, it can still pay the interest due on its loans, and the Private Debt funds with exposure to the same company keep making their 9-10% annually.
Compare the performance of Private Debt to traditional Stocks and Bonds: