Private Debt: Yield, Safety and the Emergence of Alternative Lending (Wiley Finance)

An essential resource for creating outsized returns in the private debt markets In Private Debt II: Finding Yield in a Zero Interest World , renowned investment advisor and industry leader Stephen Nesbitt delivers yet another essential resource for investors seeking to acquire private debt options in the investment market, including corporate direct lending, asset-backed lending, mezzanine lending, royalties, venture debt, structured credit (CLOs), specialty finance, and structured equity. Building on the success and popularity of Private Debt: Opportunities in Corporate Direct Lending , this latest edition of the author’s flagship text helps readers understand this complex and rapidly growing asset class. The book also offers: Explorations of the opportunities, relevant risks, and historical yield provided by private debt Discussions of a variety of loan investment vehicles, including the Business Development Company structure Strategies for structuring a direct loan portfolio and how to fit it into your overall investment strategy A can’t-miss resource for serious investors looking for opportunities to earn higher yields than those offered by traditional index funds while still retaining reasonable safety of principle and liquidity, Private Debt II will undoubtedly become the go-to guide for anyone looking for tried and tested debt investment strategies. Cover Title Page Copyright Page Contents Introduction List of Exhibits Acknowledgments Chapter 1 Overview of Us Middle Market Corporate Direct Lending The Rise of Nonbank Lending Direct Lending Investors Direct Lending Illustration Chapter 2 the Historical Performance of Us Middle Market Direct Loans The Cliffwater Direct Lending Index (cdli) Us Middle Market Direct Loan Performance Yield on Direct Loans Net Gains (losses) Net Realized Gains (losses) Net Unrealized Gains (losses) Total Return Chapter 3 Performance Comparisons to Other Asset Classes Return Risk Drawdown Direct Lending and the GFC Stress Test Direct Lending and the Covid Stress Test Chapter 4 Current Yield or Yield to Maturity? Current Yield Yield-to-three-year Takeout Chapter 5 Comparative Credit Loss Rates Nonaccruals and Implied Recoveries for Middle Market Corporate Loans Chapter 6 How Liquid Are Direct Loans? Chapter 7 Middle Market Loans as a Hedge Against Rising Interest Rates Chapter 8 Credit as a Separate Asset Class What Is an Asset Class? Private Debt: the Full Picture Chapter 9 Senior and Unitranche Direct Lending Chapter 10 Loans and the Theory of Credit The Merton Model Firm Volatility Risk-free Rate Time to Maturity Estimating Loan Risk Estimating Loan Portfolio Risk Testing the Merton Model Merton Model with Covenants Chapter 11 Risk Premiums in Us Middle Market Lending Methodology Chapter 12 Covenants and the Loan Agreement Chapter 13 Should Direct Loan Portfolios Be Leveraged? Simulated Direct Loan Portfolios with Leverage Portfolio Characteristics, Leverage, and the Cost of Financing Chapter 14 the Democratization of Alternatives The Private Partnership Model for Investing in Private Assets Chapter 15 Business Development Companies (BDCs) What Is a BDC? BDC Industry Statistics Private BDCs Publicly Traded BDCs BDC Market Indexes BDCs: a Tale of Two Markets BDC Dividend Yield BDC Total Return Chapter 16 Interval and Tender Funds Interval Funds Tender Funds Chapter 17 Selecting Direct Lending Managers Selection Matters Manager Direct Loan Yield Credit Losses Across Direct Lenders Total Return Direct Lending Managers Organization Investment Strategy Origination Underwriting Loan Construction and Monitoring Workout Portfolio Construction Leverage Financing Fees and Expenses Track Record Chapter 18 Loan Valuation Senior Versus Subordinated Loan Pricing Valuing Direct Middle Market Loans Using Statistical Methods Chapter 19 Investment Fees Management Fees Leverage Effective Management Fee Carried Interest Preferred Return Total Fees on Nav Total Fees as Percentage of Gross Income Factors Explaining Fee Variation Comparisons to BDC Fees Direct Lending Fees and Alignment of Interest Chapter 20 Portfolio Construction Direct Lending Benchmarks The Importance of a Benchmark The Cdli as a Private Debt Benchmark Diversification Chapter 21 Expected Returns and Risks from Direct Lending Expected Return Expected Risks Chapter 22 Asset Allocation Chapter 23 Direct Lending Performance Under a Volcker-like Fed Policy Regime Direct Lending Return Forecast Under a Volcker-like Policy Regime Income Realized Losses Unrealized Losses Fees and Expenses Asset Class Comparisons Under a Volker-like Policy Regime Chapter 24 Enter SOFR Early Observations Chapter 25 European Middle Market Direct Lending Key Characteristics of the European Direct Lending Market Evolution of the European Direct Lending Market Capital Structure of European Direct Loans Risk Factors Chapter 26 the Borrower’s Perspective Us Borrowers European Borrowers Chapter 27 Enhanced Lending Direct Versus Enhanced Lending Mezzanine Debt and Structured Capital Mezzanine Debt Market Size and Structure Expected Return and Risk Investment Strategies Structured Capital Market Size and Structure Expected Return and Risk Investment Strategies Collateralized Loan Obligations Leveraged Loans Clo Structure Clo Return and Risk Clo Mechanics Clo Collateral Manager Venture Debt Market Size and Structure Expected Risk and Return Investment Strategies The Cliffwater Direct Venture Lending Index (cdli-v) Rescue Financing Market Size and Structure Expected Return and Risk Investment Strategies Asset-based Lending Market Size and Structure Expected Return and Risk Investment Strategies Real Estate Debt Current Market Environment Private Real Estate Debt Funds Real Estate Loan Uses, Characteristics, and Structures Expected Return and Risk Profiles Market Outlook Infrastructure Debt Market Environment Market Size and Structure Expected Return and Risk Investment Strategies Royalties Market Size and Structure Expected Return and Risk Investment Strategies Reinsurance Market Size and Structure Expected Return and Risk Investment Strategies Litigation Finance Market Size and Structure Expected Return and Risk Investment Strategies Conclusion Glossary About the Author Index Citations Index Eula "The essential resource for navigating the growing direct loan market Private Debt: Opportunities in Corporate Direct Lending, Second Edition provides investors with a single, comprehensive resource for understanding this asset class amidst an environment of tremendous growth. Traditionally a niche asset class pre-crisis, corporate direct lending has become an increasingly important allocation for institutional investors--assets managed by Business Development Company structures, which represent 25% of the asset class, have experienced over 600% growth since 2008 to become a $91 billion market. Middle market direct lending has traditionally been relegated to commercial banks, but onerous Dodd-Frank regulation has opened the opportunity for private asset managers to replace banks as corporate lenders; as direct loans have thus far escaped the low rates that decimate yield, this asset class has become an increasingly attractive option for institutional and retail investors"-- Provided by publisher