Investment Grade Private Credit

What is investment grade private credit?

A $2+ Trillion Market Used by Nearly All US Life Insurers. The $2+ trillion investment grade private credit market is used by nearly all US life insurers and about half of US pension funds as a complement to investment grade bonds, for diversification and income enhancement. Functionally, an investment grade private placement is a hybrid of a public bond and a bank loan. It is rated, like a bond.

How is investment grade private credit different from "private credit"?

The Same Two Words Describe Two Different Markets. Most coverage of “private credit” describes levered lending to sponsor-backed middle-market borrowers — a market Apollo sizes at roughly $2 trillion.[2] Investment grade private credit is a different business: investment-grade-rated debt, issued by large corporates and project sponsors, held largely by insurers.

How large is the investment grade private credit market?

Life Insurers Alone Hold Some $1.5 Trillion of Issuance. Life insurers remain the largest investors, with some $1.5 trillion of issuance sitting on their balance sheets.[1] Over the past decade the investor base has diversified well beyond them — to pension funds, endowments, large family offices and property and casualty insurers.[1]Neuberger Berman describes demand as continuing to outpace supply even as issuance.

Who issues investment grade private credit, and why do they choose it over public bonds?

Almost Always, It Comes Down to Customisation. An issuer with investment-grade credit can access the public bond market. It chooses a private placement when the public market cannot give it the structure it needs.

What covenant protections do investors get?

Recoveries of 92% Versus 47% in the Public Market. Voya reports recoveries of 92% on private placements against 47% for public bonds — a gap widely attributed to the presence of covenants, and often collateral, in private deals which do not comparably exist in the public market.