Around the world companies are delisting from stock exchanges as they battle to stay afloat or review their status. In the past decade the Johannesburg Stock Exchange alone has lost 26% of its listed companies, and more than 50% over the past 30 years. This leaves the traditional fund managers with a much smaller pot within which to spread the risk of, and grow your funds.
A recent article in Moneyweb provides valuable insight into the growth of using private debt as an effective way of growing funds. They say;
“It is perhaps no coincidence that private debt as an alternative investment class is booming just as companies delist at ever-increasing rates.
The JSE delistings rush has been well documented – from 776 listed companies 30 years ago to around 300 today. In other words, the universe of available stocks has reduced by more than half.
Globally, the trend is similar: World Bank data shows that the number of US-listed companies has halved since 1996.
Compare this against the phenomenal growth of private debt, which falls under the banner of alternative investments. It’s a market currently worth about $1.5 trillion and is expected to double to $3 trillion in the next five years, says Dino Zuccollo, head of investor solutions at Westbrooke Alternative Asset Management.
Alternative assets are reckoned to be worth $17 trillion globally and are expected to grow to $25 trillion over five years – with private debt likely to generate much of this growth.
“Private debt is one of the fastest growing asset classes globally, and there are a number of reasons for this,” says Zuccollo. “One of the key reasons behind the proliferation of private debt was new Basel banking rules introduced in 2008 that imposed regulatory restrictions on banks, making it sub-economic for them to do certain types of lending. That’s a market that has been filled by private debt.
Rising rates, inflationary pressures, and economic uncertainty offer a few unique advantages for investors, says research by EY, adding that “most of the major private equity players have been channelling an increasing share of their assets into the private credit market”.
This is an auspicious moment for private debt. Jonathan Gray, CEO of Blackstone, the world’s largest alternative asset manager, describes the current environment as a “golden moment” for this emerging asset class.”
Stratton Morgan offers you a private debt offering, a ‘loan asset’, through Body Corporate Funding Solutions, (BCFS), that has been working in South Africa for 25 years. Whilst there are many new kids on the block who are scrabbling to catch up, BCFS offer a tried and tested model, offering you peace of mind.
