Bar chart showing annualized 3-, 5-, 10-, 15-, 20-, and 25-year returns for Burgiss Private Debt and the Bloomberg U.S. Government/Credit Bond Index as of September 2023. Private debt outperformed credit at all time frames
Sources: Bloomberg, The Burgiss Group, LLC (Burgiss), and Wells Fargo Investment Institute, as of September 30, 2023. For illustrative purposes only. The Burgiss Private Debt Index is a pooled quarterly time weighted rate of return series based on data compiled by Burgiss from over 800 private debt funds (generalist, senior, mezzanine, and distressed debt), including fully liquidated partnerships, formed after 1986. The return series is net of fees, expenses, and carried interest. The benchmark is issued on a quarterly basis, approximately 80 calendar days after quarter end. Most recent data lags up to 2 quarters for the Burgiss Private Debt Index. The Bloomberg U.S. Government/Credit Index is a broad-based index that measures the non-securitized component of the Bloomberg U.S. Aggregate Index. It includes investment grade, U.S. dollar-denominated, fixed-rate Treasuries, government-related and corporate securities. Broad-based Indexes do not represent investment performance or the results of actual trading. Index returns reflect general market results, assume the reinvestment of dividends and other distributions, and do not reflect deduction for fees, expenses, or taxes applicable to an actual investment. An index is unmanaged and not available for direct investment. Past performance is no guarantee of future results.
Bonds are subject to market, interest rate, price, credit/default, liquidity, inflation and other risks. Prices tend to be inversely affected by changes in interest rates. Alternative investments, such as private credit funds are not appropriate for all investors and are only open to “accredited” or “qualified” investors within the meaning of the U.S. securities laws. They are speculative and involve a high degree of risk that is appropriate only for those investors who have the financial sophistication and expertise to evaluate the merits and risks of an investment in a fund and for which the fund does not represent a complete investment program. Private equity funds use complex trading strategies, including hedging and leveraging through derivatives and short selling. These funds often demand long holding periods to allow for a turnaround and exit strategy. Private equity investing involves other material risks including capital loss and the loss of the entire amount invested.
Key Takeaways
- Though less liquid than public debt, Private Debt has historically provided an attractive premium given the complexity of lending to entities that are unable to borrow from traditional capital market sources.