Private debt refers to the provision of non-publicly traded debt finance to consumers and businesses.
Examples of private debt finance include consumer loans (unsecured including credit cards or personal loans and secured such as car leases), business loans (secured including invoice financing or supply chain finance and unsecured working capital loans) and residential or commercial property mortgages.
In Australia, the private debt market exceeds $2.6 trillion and is dominated by the four major banks, with other authorised deposit taking institutions such as building societies and credit unions (all together, authorised deposit-taking institutions, or ADIs) being significant participants. While lending outside the ADI sector is a well-established practice, in recent years lending by non-ADIs has become an increasingly important source of debt finance to individuals and small businesses (for example, the evolution of non-bank residential mortgage lenders and the emergence of alternative finance companies).
Growth in non-ADI lending has been experienced in terms of the number of new lenders, increased volume of loans and the broadening range of products offered. There are now over 100 non-ADI lenders in Australia with aggregate loans of approximately $150bn.
Opportunities for Manning Asset Management will include exposure to loans originated by both ADI and non-ADI lenders.
Private debt is an attractive asset class for investors providing a real return profile, steady income stream, lower volatility, a level of capital stability (with structural enhancements) and can be used to diversify away from other asset classes.