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BlackRock Diversified Private Debt

A Diversified Approach to Income Generation

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

 


Global financial crises and tighter regulations have reduced bank lending by ~$4tn from 2008-20191 leading to less supply and an increased demand for private capital investments.

In response, BlackRock has launched the BlackRock Diversified Private Debt Fund to capitalise on attractive private debt market opportunities and provide investors with a yield premium and enhanced oversight, along with reduced complexity, through a single point of entry.

Risk: The return of your investment may increase or decrease as a result of currency fluctuations.
1 Source: Data sourced from Bank for International Settlements, November 2019. Market Value of bank credit to the private non-financial sector in Euro Area and the UK in USD, adjusted for breaks.

 


For clients seeking income, today’s credit markets offer many opportunities.

In the last ten years, they’ve almost doubled in size to £4 trillion1 worldwide.

1 Source: Data sourced from Bank for International Settlements, 30 November 2019 (latest available). Market Value of bank credit to the private non-financial sector in Euro Area and the UK in USD, adjusted for breaks.

However, since the global financial crisis, there has been a barrier to bank lending.

Across the globe, banks have gravitated towards larger companies, leaving the middle-market underserved.

Many have also reduced their exposure to real estate assets or exited the space completely.

But global traditional middle-market companies are the engines of growth.

For those seeking a more reliable income, diversification or premium over public markets, private credit is an increasingly popular choice.

We estimate the private debt premium is 300-450bps over liquid public markets4. The asset class also exhibits lower default rates and higher recovery rates versus syndicated loans and high yield bonds.

4The figures shown relate to past performance. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy. Source: BlackRock, as at 31 October 2020. The figures were calculated based on weighted average spread levels of dedicated Direct Lending funds managed by TCP relative to weighted average spread levels of the S&P LSTA Middle Market Loan Index and Leveraged Loan Index. On 1 August 2018, BlackRock acquired TCP.

BlackRock manages £149bn in Assets Under Management in private debt strategies.

In 20 years’ of investing in these asset classes, we’ve deployed £28bn.

We bring together 370 investment professionals based in 19 cities worldwide. This global reach helps us access proprietary investment opportunities.

Our credit investors rely on BlackRock’s research platform to deepen their insight and balance risk and reward.

We have a disciplined investment process, with ESG integrated throughout.

We aim to select only the very best investments; in 2020, we saw over 2200 corporate deals, but funded just 84 (approximately 4%).

Source: BlackRock, as at 31 December 2020.

UK pension schemes service their members with income through their retirement. And private debt can play a pivotal role in making this possible.

We understand that sourcing, reviewing and managing investments places huge strain on many pension schemes.

That’s why we’ve created the BlackRock Diversified Private Debt Fund.

This is one strategy which provides exposure to a material part of the global economy…

including companies’ central to growth, employment, and projects providing essential public services.

We dynamically allocate capital across the credit spectrum, based on our relative market views.

Through a diversified pool of high-quality assets, we aim to reduce overall portfolio risk and volatility.

Plus, we take on the complexities of sourcing investments and constructing portfolios to keep things simple for our clients.

Want to know more?

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Why BlackRock Diversified Private Debt?

1. Strive for a robust portfolio construction process with the goal to deliver reliable yield

The Fund seeks to provide investors with a yield premium over liquid credit markets, reliable current income, and capital preservation through disciplined underwriting. The team sources high quality assets in the market with strong fundamentals and defensive characteristics.

Risk: There is no guarantee that a positive investment outcome will be achieved.
Source: BlackRock, as at 31 December 2020.

2. Access to a broad range of private debt areas

The Fund aims to use bottom-up selection with top-down strategy allocation to capitalise on market dynamics. A flexible allocation allows the Fund to tilt towards the most attractive segments in the market and take advantage of market dislocations. Additionally, it seeks to target private debt investments throughout the capital structure across a wide range of underlying strategies, asset types, sectors, and geographies to build a portfolio of 175-200 high quality assets.

Risk: The Fund will invest in debt and debt-related instruments. Such debt will be secured and may be structurally or contractually subordinated to substantial amounts of senior indebtedness. Moreover, in the case of the Fund’s investments, such debt may not be protected by financial covenants or limitations upon additional indebtedness and there is no minimum credit rating for such debt investments
Source: BlackRock, as at 31 December 2020

3. Reduced complexity through a single point of entry

The Fund provides a holistic solution that allocates capital dynamically through assessing relative value across the private debt universe. A single strategy ensures complementary exposures and ensures real diversification. The Fund reduces the administrative and governance burden of multiple investments, with one reporting, one capital drawdown, and one performance fee netted across the different strategies.

Risk: There is no guarantee that a positive investment outcome will be achieved
Risk: Diversification and asset allocation may not fully protect you from market risk
Source: BlackRock, as at 31 December 2020.

The Team

 People
370+ private debt investment professionals
dedicated to the proposed strategies¹
Currency – GBP
£149bn
Assets under management¹
Choice
£28bn+ capital deployed
across underlying private debt strategies
 Global
19
Cities worldwide

The Fund is run by James Keenan, the CIO and Co-Head of BlackRock’s Credit platform, together with leaders of the underlying investment teams. This Investment Committee is responsible for the asset allocation, portfolio construction, and risk monitoring.

The individual investment teams aim to provide global reach with strong local market insight and expertise. Access to experienced resources across the BlackRock platform we believe leads to the origination of differentiated deal flow. Furthermore, the team has established processes and best-in-class systems for effective risk management.

Risk: There is no guarantee that a positive investment outcome will be achieved.
Source: BlackRock as at 31 December 2020.

1Assets under management (‘AUM’) and investment professional count represent the entire Global Credit and Real Assets platform. Applicable strategy AUM and investment professional count for the Diversified Private Debt strategy is £27bn and 125 people accordingly.

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Want to know more?
For more info, contact the Diversified Private Debt team:
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