Growing appetite for private credit amongst HNWIs and family offices

From Ben Rossi on What Investment:

“Faced with volatility and uncertainty in public markets, investors have increasingly turned to alternative asset classes for uncorrelated returns and, particularly, income. There is growing appetite for private credit among high net worth individuals (HNWIs) and family offices (FOs), with some investors now committing some 11% of their investable funds to this asset class. With interest rates remaining at an unprecedented low and equity markets continuing to fluctuate, we anticipate that this trend is set to remain.

The growing popularity of private credit via a range of funding instruments including specialist investment trusts, funds, Peer2Peer platforms (P2P) and secured loan notes, lies primarily in the strength of the risk-adjusted return. As an alternative asset class not only does it offer diversification and steady cash flows, it is also uncorrelated to the stock markets whilst generating a significantly higher yield than the traditional fixed-income markets. Whereas annual yields on publically traded corporate bonds currently generate yields of two to five percent, typical interest rates for private credit transactions can easily double this. ”

P2P lending as a investment product offers not only high returns to the investors, but also diversification benefits when allocated to a balanced investment portfolio. With the emergence of more HNWIs and family offices as a macro trend, P2P lending volume is expected to experience exponential growth and remain one of the most attractive alternative asset classes.

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