Liquidity – or a lack of it – is frequently cited as a reason why private credit’s push into the retail market will face challenges.
But this isn’t an issue in practice for most individual investors, as Benefit Street Partners’ head of research Anant Kumar explains.
“Private credit should be part of everyone’s portfolio,” he says. “People are criminally underinvested in alternatives.
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“If you’re an average investor who doesn’t turn over their book every year, this is a great product.”
Kumar makes the point that individual investors are unlikely to sell their entire portfolio each year, so they are in effect holding on to assets in the long term without enjoying the benefits of the illiquidity premium.
“It’s all about educating people, you don’t need to have all your investments across treasury bonds and liquid assets,” he says. “You may as well get that illiquidity premium if you’re holding on to assets anyway.”
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Kumar said that uptake among individual investors for private credit has been great across the industry, citing the “tremendously successful” efforts of Blackstone in rolling out its offering, having raised $100bn across its retail funds.
The asset manager launched its private debt interval fund – the Franklin BSP Private Credit Fund – one-and-a-half years ago, with a minimum investment of $2,500 (£2,018).
Investors can take 20 per cent of their funds out each year, while still receiving the illiquidity premium.
Kumar said that “numbers have been good so far”, as the fund aims to get to “critical mass”. The fund should have around $120m of equity, or $170m with leverage, by the middle of May.
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Around 35 per cent of the portfolio is in direct lending, alongside some structured CLO tranches. Some of the funds will be used to invest in commercial real estate later in the year, Kumar said.
“This is a growing asset class,” Kumar says. “Five years ago it was a small asset class, but now it’s become so big, it’s part of that trivector of syndicated loans, high-yield bonds and direct lending.
“You can’t ignore it any more if you’re a retail investor or financial adviser.”
