Investment in private debt continues to soar to new levels, with assets under management held by private credit firms expected to reach over $1 trillion by 2020. This is not surprising considering a recent Prequin survey found that 91% of investors claimed private debt met or exceeded performance expectations last year.
According to consulting and investment firm Cambridge Associates, private credit has delivered average annual returns of 8.75% over the last 5 years, and 10.42% over 20 years. Compare that with the Bloomberg Barclays Government/Credit Index benchmark which returned -1.37% over the same period. As a result, more investors are pouring money out of the public bond markets and into private credit funds.
Similar to what is happening in the public and private equities markets, investors are increasingly looking to offset public market volatility and diversify their portfolios with private debt. Also like equities, debt is an asset that requires transparency, standardization and a market for liquidity, which is why blockchain is a logical application for private debt. Blockchain-enabled “smart securities” like the ones offered on Templum’s platformwould provide issuers and investors of private debt with better transparency, auditability and access to secondary liquidity.