Despite the uncertainty around market conditions, institutional investors will still find private debt attractive in 2023. The asset class offers options that fit various risk appetites while providing diversification. For example, Direct Lending to the middle market requires strict underwriting and deal terms. This strategy tends to yield better returns during a downturn vs. the large-cap market. For those firms that offer opportunistic credit strategies, investors will find the flexibility to pivot from making loans to trading stressed/distressed debt in secondary market appealing.
Whether investors are concerned with inflation protection, higher interest rates, or slower economic growth (or all of the above), investing in private debt offers several solutions.