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PitchBook Analyst Note: Private debt performance warrants a second look?uq=UG6efJS6

1Q 2018

PitchBook Analyst Note: Private debt performance warrants a second look

March 29, 2018

PitchBook Analyst Note: Private debt performance warrants a second look?uq=UG6efJS6
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PitchBook's latest analyst note explores the performance of private debt strategies and how PE firms may find them key areas for expansion, primarily as other traditional PE strategies have become more and more crowded and competitive. 
 

Highlights include:

  • The 10-year horizon IRR for private debt funds is 8.2%, nearly the sameas the 8.0% and 9.6% produced by VC and PE funds, respectively. More recently, however, private debt performance has lagged that of all other private strategies due to the limited upside of held-to-maturity debt securities in a period of historically low yields.
  • Compared to the Bloomberg Barclays US Corporate High Yield Index, private debt funds have outperformed in 10 of the 15 vintages from 2001 to 2015.
  • A US government spending bill passed in March 2018 included language that doubles the leverage limit of BDCs. This will create further competition amongst lenders, likely leading to more favorable rates and terms for borrowers.