Wealth managers select private debt investments by following a rigorous selection process that aligns with their investment objectives and existing holdings. Here are some of the factors that wealth managers consider when selecting private debt investments:
- Investment strategy: Wealth managers choose a private debt strategy that aligns with their investment objectives and existing holdings. Private debt is a broad and versatile asset class, offering a variety of approaches, so it’s important to choose a private debt strategy that aligns with your investment objectives and existing holdings.
- Manager selection: Wealth managers select a competent manager that becomes critical once a decision is reached to employ alternative credit strategies private debt investments. 1 . The manager should have a proven track record of success in managing
- Risk management: Wealth managers should be aware that private credit isn’t a monolithic asset class, and it includes subcategories as diverse as investment-grade private placements, real estate debt, and venture capital loans 2 . Wealth managers should choose a private debt strategy that aligns with their risk tolerance.
- Diversification: Wealth managers should diversify their private debt investments to minimize risk. Private debt funds of funds invest in a variety of third-party debt funds depending on the fund strategy, providing greater portfolio diversification 1 .
- Yield and returns: According to Preqin, 36% of investors are attracted to private debt because it provides them with a reliable income stream, while 37% cited the asset class’ high returns debt investments that offer attractive yields and returns. 3 . Wealth managers should choose private
- Complexity: Some private debt strategies focus on assets or structures too complex for typical traditional lenders to underwrite, relying on complex approaches to properly evaluate and manage risks choose private debt investments that they can understand and evaluate properly. 2 . Wealth managers should
Overall, wealth managers select private debt investments by following a rigorous selection process that aligns with their investment objectives, risk tolerance, and existing holdings. They choose competent managers, diversify their investments, and evaluate the complexity of the investments to minimize risk and maximize returns.