what is private debt?
Private debt, or direct lending, is an investment strategy where non-bank lenders (institutional investors, debt funds, insurance companies and private investors) provide loans (senior, mezzanine and other forms) to support the financing objectives and requirements of businesses, including growth, acquisitions and funding for developments.
Since the 2008 Global Financial Crisis, regulatory reforms (such as Basel III) increased costs and restricted credit appetites from bank credit committees have caused banks to retreat from certain areas of the debt market (including private companies in the small- and middle-market segment). This has been further exacerbated by the recent steep increases in global interest rates, which have caused banks to redirect internal resources away from the writing on new loans in favour of increase portfolio management.
This left a significant void in global debt markets, which is quickly being filled by private investors seeking enhanced returns. In 2019, private debt officially became the world’s fastest growing alternative asset class, having increased from $205bn in private loans extended in 2007, to $1.4tn in 2022 (source Preqin). When compared to traditional fixed income, private debt can provide investors with higher yields, portfolio diversification and lower portfolio volatility.
Westbrooke Income Plus (the Strategy) is a South African private debt investment strategy which aims to provide investors with a unique advantage by generating an attractive cash yield in excess of that provided by traditional fixed income funds.
The Strategy is focused on the generation of a consistent cash yield which increases in line with changes in interest rates by investing in a diversified portfolio of prime-linked, secured, senior or subordinated, interest-paying credit investments.
The Strategy targets an investor return of between Prime + 1.5% – 3.0% p.a. in ZAR (net of all fees and costs), which is paid to investors on a quarterly basis.
Core to the Strategy’s investment philosophy is capital preservation, with all investments benefiting from either tangible security and/or additional credit enhancements (such as shareholder and corporate guarantees).
key investment highlights
Targeting ~Prime + 1.5% – 3.0% p.a. in ZAR (net of fees and costs)
Experienced local investment team
Capital preservation focus through senior ranking security
Lack of volatility/correlation when compared to traditional investments
Inflation protection through interest rate linked loans
Investor liquidity supported by shorter duration duration loans
~14%+ net cash yield
R420 million invested
12 private loans across South Africa
50% loan to security value
17-month weighted average loan term
Westbrooke Alternative Asset Management is a registered financial services provider.
These returns are targeted, are not a certain indication of future performance and not guaranteed. The benchmarks presented are for information purposes only and do not represent Westbrooke’s targeted returns or future performance benchmarks. Returns and future performance are not guaranteed.