NEW YORK, Aug. 27, 2020 /PRNewswire/ -- The latest CEPRES white paper explores trend developments in Private Debt, based on an analysis of deal level transactional data from the CEPRES Platform, encompassing 12,800 Private Debt deals and over 234,000 cash flow transactions, as well as over 800 Private Debt focused funds, from the millennium through to recent years.
The analysis also investigated whether changes in the US Federal Reserve Funds Rate, which impacts lending costs, also have an effect on the interest earned by Private Debt funds; in other words, Private Debt gross returns.
In 2008, the Fed cut rates to an annual average of 1.9% to stimulate the economy, with private debt returns increasing to 13.3% Gross IRR and trending upwards to 21.3% in 2009, constituting a clear post-GFC bounce. The recent period between 2016 and 2019 saw a steady increase in Fed rates from an annual average of 0.4% to 2.2%, while median Private Debt returns declined from 15.6% Gross IRR to a low of 10.5% in 2018, followed by an incremental recovery in 2019 to 13.1%.
In Q2 2020, Covid-19 brought a new kind of uncertainty, with interest rates nosediving due to the recession caused by the coronavirus crisis, and it remains to be seen if a pattern emerges.
The white paper provides comprehensive analysis of this growing asset class, laying out its own unique complexities, and what investors need to look out for before committing.
Commentary: "As banks must contend with tighter regulations and lending practices, Private Debt might be more important than ever for LP portfolios and especially for private companies. With an appetite for capital allocation to this asset class growing, driving a more competitive environment for GPs and compounded by a coronavirus-driven recession, it remains to be seen whether private debt's liquidity profile will shift back towards its early era. Before signing LPAs, LPs need to understand not only the fund net returns, but also underlying deal level gross returns, risk, liquidity and then also operating metrics. The CEPRES Platform provides the tools and data, enabling a better and informed investment decision."
Dr. Daniel Schmidt, Founder & CEO, CEPRES.
CEPRES is the leading digital platform for investment analytics and counterparty networking for Private Capital Markets. CEPRES began in 2001 as the Center of Private Equity Research and was the first to 'look-through' private market funds to underlying deal and asset performance. Today, our award-winning online platform securely connects and empowers thousands of professionals in the largest private investment network in the world.
CEPRES combines the most powerful data with sophisticated expert analysis frameworks to empower Private Market investors. Through CEPRES, decision makers can transition from anachronistic, manual PDFs and spreadsheets into the digital age to secure their investment data, and gain true insights on their portfolios of funds, deals and underlying portfolio company assets.
The CEPRES Platform is built on the Digital Data Hub, a secure data exchange network connecting all market participants. Institutional Investors (LPs), Fund Managers (GPs), Advisors, Asset Servicers and other investment professionals interact and exchange the most granular data on one secure, integrated platform optimized for their own use cases.
To date over 2,750 GPs & LPs have securely exchanged and modelled investment data of over 8,000 funds and 82,000 deals worth over $29.7 Tr. in Enterprise Value.