Private debt
Why invest in private debt?
There is increasing demand from borrowers for financing from alternatives sources, as banks pull back from lending and syndicated markets see ever larger deal sizes. At the same time, borrowers are increasingly choosing private debt for the benefits it can provide, even when financing is available from traditional sources.
BRENT PATRY: Which areas of the credit market do you think provide the most attractive opportunities?
JAMES KEENAN: I actually think 2024 is going to be another really good year to deploy. I mean, first off, you have an economy that is softening, but you're still talking about a growth environment. You have a generally tight banking system. So, as you start to see more activity come in, I think you'll get really nice spreads per unit of risk. So, corporate direct lending remains attractive. Some of the bank deleveraging trades, risk transfers, real estate dispositions.
BRENT PATRY: When you think about the overall size of the private debt markets and the trajectory of growth, how do you think that is growing relative to other asset classes and other strategies within credit?
JAMES KEENAN: We see the market growing significantly over the next several years, but let's define that, right? You have a market right now that, because of the volatility and disruption in the banking system, you're going to see a shift in policy and even risk management around deposit flight. And what does that really mean? You're talking about trillions of assets coming out of the banking system, right, as you start to see more equity being needed in that. And if you think about the US banking system alone, that might be $2-3 trillion. And broadly speaking, globally, that's even going to increase. So, when we think about the market share shift to private debt, they're going to play a huge role in that opportunity. On top of that, because of the growth of the market, we see it as a good funding source relative to public markets. And then, third, just general GDP growth and earnings growth. We think that it will continue to grow the market. So, for those three reasons, we think we're fairly conservative when you think about the size of private debt and the opportunity for clients to continue to invest in that.
BRENT PATRY: Are there one or two key messages you'd like to give our clients about how we're positioning our portfolio or addressing the opportunity set?
JAMES KEENAN: Yeah, I think the last 12 to 18 months, some of the attractiveness about private debt for investors has been avoiding the risk of duration, right? And we certainly have seen that move and a little bit more of a stabilization of rates and where policy is going. I think, as you think about the next 12 months, it's still going to provide a really attractive opportunity. Because as you continue to see this mega shift, when the reduction of risk and assets off of the banking system, it's providing a huge pool of assets and even at a flat or inverted curve. You're talking about assets that are coming with really nice yields associated to in comparison to either the equity or the fixed income market in a growing market. So, I think that is really the risk or the return profile still looks really attractive in 2024.
Private debt viewpoints with James Keenan
Watch for the latest timely insights from the Global Head and Chief Investment Officer of our Private Debt business.
Awards and recognition
Investment strategies
Direct lending
Private loans to performing middle market companies
Why now?
- Rapid deployment: Strong and growing borrower demand for non-bank financing allows for rapid and highly selective deployment
- Income: Floating rate loans can deliver potentially higher income relative to similar public market debt in a rising interest rate environment
- Structural protections: Senior secured loans with bilaterally-agreed terms can provide downside protection rarely offered in public markets
Opportunistic
Capital solutions with complexity and illiquidity premiums
Why now?
- Dynamic flexibility: All-weather strategies designed to capture the best risk-adjusted opportunities regardless of the market environment
- Premium returns: Potential for equity-like returns with credit-level risk driven by predominantly income and some capital appreciation
- Downside mitigation: Bilateral negotiation affords structure and pricing influence and robust credit documentation, including comprehensive covenants and other protections
Venture and growth debt
Operationally flexible loans to innovative, high-growth companies
Why now?
- Favourable market dynamics: Dynamics of venture & growth markets highly favourable towards a structured debt strategy
- Enhanced returns: Potential for equity-like returns with credit-level risk driven by predominantly income and some capital appreciation
- Downside mitigation: Target transactions only alongside top-tier equity sponsors. Focus on well-funded companies with long cash runways, experienced management teams, underlying profitability, and where senior-security available.
Infrastructure debt
Global platform investing in energy, power, renewables, transport, social and digital assets
Why now?
- Income: Potentially higher income relative to similarly rated corporate credit.
- Diversification: Historically, 2-2.5x lower loss rates and low default correlation3 to corporate credit; complements OECD core equity infrastructure.
- Liability matching: Longer maturity debt providing for 10-25 year+ liability matching.
- Inflation risk mitigation: Floating rate infrastructure debt may provide inflation management in a rising rate environment.
Real estate debt
Our platform combines global reach, industry expertise, and trusted deal execution capabilities
Why now?
- Market depth: Retrenchment of traditional lenders (banks) creates a large opportunity set for private lenders like BlackRock to meet borrower needs for refinancing and new capital.
- Risk-adjusted returns: Private market spreads widen as bank activity recedes; Combined with increased base rates, this has potential to boost returns across the capital stack and at all risk (LTV) levels.
- Diversification & Income: Significant diversification opportunities across regions, properties, sectors and loan types. Ability to adjust exposures to capitalize on prevailing market environment.
Multi-strategy debt solutions
Flexible single entry point global solutions across credit universe
Why now?
- Simplicity: Access to dedicated multi-credit teams improves efficiency and reduces governance complexity as clients seek to do more with fewer managers
- Flexibility: Active allocation across opportunities in global credit as the market evolves
- Transparency: Holistic view of credit exposures improves risk oversight while delivering integrated reporting
Learn more about the role of private debt in your portfolio
BlackRock team
-
Equities
Taking Stock: Q4 2024 equity market outlook
Stock market volatility is likely to continue in Q4 but could reveal buying opportunities where fundamentals are strong. Equity CIO Tony DeSpirito explains. -
Investing in an era of flouted rules
Our fixed income market outlook explores the unique post-pandemic economy and what it means for bond investors. -
No Topic
Capital at risk: nature through an investment lens
13-Aug-2024 | By BlackRock Investment InstituteAs natural resources come under growing strain, we see new risks and opportunities emerging for investors. The data landscape will be key to tracking both. -
No Topic
Fixed income: the future is NEAR
Active short duration fixed income offers attractive income, low risk, capital preservation, and benefits like diversification. -
No Topic
Views from the LDI desk: Spring 2024 markets commentary
22-May-2024 | By Elizabeth Perry, CFA2024 has so far proved to be another volatile year for interest rates. Now is an opportune time for clients to re-evaluate their overall interest rate hedge. -
No Topic
Why we favor Japan in strategic portfolios
14-May-2024 | By BlackRock Investment InstituteWe hold an above-benchmark allocation to Japan stocks in long-term portfolios as a benign macro backdrop brightens the outlook for corporate profits. -
No Topic
AI stocks soar: Is there potential for further gains?
Investors appear to be positioning portfolios to capture outsized returns within the AI theme. Is there potential for further gains? -
No Topic
A bigger role for active strategies
27-Feb-2024 | By BlackRock Investment InstituteThe new regime of greater macro and market volatility rewards an active approach. Read more about how we see active strategies playing a role in portfolios today. -
Augmented Investment Management
AI advancements offer powerful tools for generating alpha forecasts. Explore our systematic framework for designing AI-enhanced alpha quant models. -
No Topic
Private Debt: The Core Middle Market
The middle markets are sometimes overlooked in the context of the broader economy, but they are important segments where we see opportunities in private debt. -
Income, evolved
Diversify income streams to reduce style bias and mitigate market volatility. Learn about our systematic approach to investing across asset classes. -
Alternatives
2024 Private Markets Outlook
27-Dec-2023 | By BlackRockDiscover insights and perspectives from our private markets senior leaders in BlackRock’s 2024 Private Markets Outlook. -
No Topic
Climate-aware return assumptions: an update
19-Dec-2022 | By BlackRock Investment InstituteWe see the transition to lower carbon emissions as one driver of higher macro volatility in the new regime. See how our strategic views reflect the transition’s impact on returns. -
No Topic
Positioning for higher macro and market volatility
15-Aug-2022 | By BlackRock Investment InstituteWe’ve entered a new market environment of higher macro and market volatility. This warrants an updated investment playbook. Check out our latest strategic views. -
No Topic
Our framework for blending returns
01-Feb-2022 | By BlackRock Investment InstituteIt’s time to stop thinking in ‘active versus passive’ terms. Our new framework for portfolio construction shows why investors should look beyond the silos. -
No Topic
Wei Li
12-Nov-2020 | By BlackRockRead the bio of Wei Li, Global Chief Investment Strategist at the BlackRock Investment Institute. -
No Topic
Todd Whitenack
12-Nov-2020 | By BlackRockTodd Whitenack helped found BBR Partners in 2000 and is Co-Managing Partner of the firm, where he is responsible for meeting BBR’s goals and driving innovation. -
No Topic
Wenjie Lu
12-Nov-2020 | By BlackRockWenjie Lu, Director, China Investment Strategist, joined BlackRock in February 2017. He is responsible for formulating in-depth local market insights. -
No Topic
LDI Key Talking Points – July 2020
17-Jul-2020 | By BlackRockLonger-dated global yields have fallen over the past month despite equity and credit markets shrugging off continued rising Coronavirus cases in parts of the US. -
Market plunge: This is not 2008
14-Mar-2020 | By BlackRock Investment InstituteMarket moves have been compounded by oil prices plunging more than 20% as an OPEC pact to stabilize prices unraveled. Read why investors should remain calm. -
Low-carbon transition
Sustainability: The tectonic shift transforming investing
17-Feb-2020 | By BlackRock Investment InstituteRead about BlackRock’s framework to incorporate ESG in portfolio construction and how the long transition toward adopting sustainability will reshape investing. -
Investment actions
Defensive factor positioning
10-Dec-2018 | By BlackRockManaging risks holistically across a multi-asset portfolio can be one of the most effective ways to maximize long-term portfolio resiliency. -
Portfolio Design
A modernized toolkit for resilient strategic asset allocation
01-Dec-2018 | By BlackRockOur portfolio construction framework offers a consistent approach that is cognisant of the large uncertainty inherent in expected returns. -
No Topic
Gerald Garvey, PhD
22-Aug-2017 | By BlackRockGerald Garvey, PhD, Managing Director, is a member of BlackRock's Systematic Active Equity team. Dr. Garvey's service with the firm dates back to 2004. -
No Topic
David Trucano
09-Jan-2017 | By BlackRockDavid Trucano, Managing Director, is Head of BlackRock Opportunistic Credit within BlackRock’s Private Debt platform, comprised of direct hedge funds and private equity-style credit strategies. -
No Topic
James Pruskowski
09-Aug-2016 | By BlackRockJames Pruskowski, Managing Director, is head of the Municipal Institutional & Wealth Management team within BlackRock’s Global Fixed Income group. Read bio. -
No Topic
Bob Miller
09-Aug-2016 | By BlackRockBob Miller is head of Americas Fundamental Fixed Income within the Global Fixed Income group. He is a member of the Global Fixed Income Executive Committee. -
No Topic
Ashley Schulten
09-Aug-2016 | By BlackRockAshley Schulten, Managing Director, is the Head of Responsible Investing for Global Fixed Income and is a portfolio manager on global green. -
No Topic
David Lomas, ACII
01-Jul-2016 | By BlackRockDavid A. Lomas, is Global Head of BlackRock Alternatives Specialists. He is a member of the EMEA Executive Steering Committee.Read his biography. -
No Topic
Brett Pybus, CFA
Brett Pybus leads the iShares EMEA Investment and Product Strategy Team. He joined in 2013 as Head of iShares EMEA Fixed Income Product Strategy. -
No Topic
Vasiliki Pachatouridi
Vasiliki Pachatouridi, Director, is the Head of EMEA iShares Fixed Income Strategy and a member of BlackRock's Systematic Fixed Income Product Strategy Team. -
No Topic
David Giordano
David Giordano, Managing Director, is Global Head of Climate Infrastructure. -
No Topic
Mark Warner, CFA
27-Feb-2015 | By BlackRockMark Warner, CFA is a Managing Director in the Risk & Quantitative Analysis (RQA) group at BlackRock. In July 2014 he became responsible for global risk management of commercial real estate exposures across both public fixed income and private equity real estate businesses. -
Alternatives
Geoffrey Shaw
27-Jan-2015 | By BlackRockGeoffrey Shaw, Director, is the portfolio manager for the BlackRock UK Long Lease Property Fund. -
No Topic
Ned Rosenman
26-Jan-2015 | By BlackRockNed Rosenman, Director, is head of client engagement for BlackRock's foundations and endowments custom solutions business. Read his biography. -
No Topic
Laurent Develay
17-Dec-2014 | By BlackRockLaurent Develay, Managing Director, Head of Emerging Markets Local Debt Investments within BlackRock's Global Fixed Income Group and the lead Portfolio Manager. -
No Topic
Pablo Goldberg
21-Jul-2014 | By BlackRockPablo Goldberg, Managing Director, is the Head of Research and Portfolio Manager for BlackRock's Emerging Market Debt Team. Read his biography. -
No Topic
Gerardo Rodriguez
21-Jul-2014 | By BlackRockGerardo Rodriguez, Managing Director, is Portfolio Manager for the Emerging Markets (EM) of the Systematic Active Equity (SAE) group. Read his biography. -
No Topic
Robert Karnes
21-Jul-2014 | By BlackRockRobert Karnes, Managing Director, is Global Head of Real Estate Debt within BlackRock’s Private Debt platform, and is a member of the Real Estate Management Committee. -
No Topic
Russ Koesterich
21-Jul-2014 | By BlackRockRuss Koesterich, CFA, JD, Managing Director and portfolio manager, is a member of the Global Allocation team within BlackRock's Multi-Asset Strategies Group. -
No Topic
Global Renewable Power
The global renewable power strategy seeks to invest in global climate infrastructure, primarily renewable power, seeking financial returns with a purpose. -
No Topic
Fiduciary management
Fiduciary management provides a fully outsourced investment solution to meet the UK DB pension schemes challenge through investment portfolios. -
No Topic
Unconstrained FIGO
Strategic Income Opportunities (FIGO) is an unconstrained strategy designed to seek consistent, attractive returns across all market environments. -
No Topic
Aladdin®
Aladdin is a tool to help your organization communicate effectively, address problems quickly, and make informed decisions at during the investment process. -
No Topic
A Fundamental Reshaping of Finance
In his annual letter to CEOs, BlackRock's Larry Fink discusses the fundamental reshaping of finance and how climate change is a significant focal point -
No Topic
Global Tactical Asset Allocation (GTAA)
Our Global Tactical Asset Allocation strategy is a data-driven, discretionary macro approach that seeks to provide incremental sources of active return. -
No Topic
Your Gateway to BlackRock
Gateway is a digital client portal to access information including investment data, reports, thought leadership and inquiries and to transact digitally. -
No Topic
Fundamental Equities
BlackRock's Fundamental Equities investors bring deep expertise and bottom-up insight that powers our mission to generate alpha. Learn more. -
No Topic
Login Page - BlackRock
-
No Topic
Custom Hedge Funds
Our Hedge Fund Solutions team has managed traditional funds of hedge funds portfolios and provided custom hedge fund solutions for more than 15 years.