Performance of Private Credit Funds: A First Look

Kenan Institute of Private Enterprise Research Paper

https://jai.pm-research.com/content/21/2/31

Posted: 9 May 2018 Last revised: 5 Oct 2019

See all articles by Shawn Munday

Shawn Munday

Kenan-Flagler Business School

Wendy Hu

Burgiss

Tobias True

Adams Street Partners

Jian Zhang

Adams Street Partners

Date Written: July 2, 2018

Abstract

Although private credit funds have rapidly grown into a standalone asset class over the last decade, little is known about the aggregate performance of these funds. To provide a first look at absolute and relative performance, we utilize the Burgiss database of 476 private credit funds with nearly $480 billion in committed capital, including a subset of 155 direct lending funds. We review the recent trends within private credit, provide an overview of various strategies, describe returns since 2004 and compare private credit to several benchmark indices in order to develop a preliminary view of performance and risk across various private credit strategies. Measures of absolute performance reveal IRRs that are positive for the top three quartiles across all strategies. The leverage loan index provides the best fit as a benchmark across most private credit strategies. Measures of relative performance (PMEs) suggest that private credit funds have performed about as well, or better than, leveraged-loan, high-yield and BDC indexes. Direct lending funds have relatively low beta and positive alpha compared to the leveraged loan or high yield indices. In addition, direct lending funds low correlation with benchmark indices may indicate diversification benefits relative to other credit strategies.

Keywords: Private Credit, Direct Lending, Private Capital

JEL Classification: G10, G11

Suggested Citation

Munday, Shawn and Hu, Wendy and True, Tobias and Zhang, Jian, Performance of Private Credit Funds: A First Look (July 2, 2018). Kenan Institute of Private Enterprise Research Paper, https://jai.pm-research.com/content/21/2/31, Available at SSRN: https://ssrn.com/abstract=3173688 or http://dx.doi.org/10.2139/ssrn.3173688

Shawn Munday (Contact Author)

Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States

HOME PAGE: http://www.kenan-flagler.unc.edu/faculty/directory/finance/shawn-munday

Wendy Hu

Burgiss ( email )

111 River St., 10th Floor
Hoboken, NJ 07030
United States

Tobias True

Adams Street Partners ( email )

1 N Upper Wacker Dr #22
Chicago, IL 60606

Jian Zhang

Adams Street Partners ( email )

1 N Upper Wacker Dr #22
Chicago, IL 60606

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