Alona Tolentino Gornick, Managing Director, Senior Investment Strategist, Churchill Asset Management joined Keith Black, Managing Director, RIA Channel to discuss the growing private debt asset class, investor trends and demand drivers.
Private debt has experienced rapid growth over the last 10-15 years. Relative to public fixed income markets, the asset class has generally provided steady income, attractive risk-adjusted returns, and stability. With increased demand from both investors and borrowers, the roughly $1.4T invested in private debt today is projected to 5x over the next decade.
Rising volatility and economic uncertainty in the public markets, has contributed to increased allocation to alternatives, broadly. Recent 60/40 portfolio challenges, coupled with innovation in product structures has opened up private market access to a whole new group of investors and their advisors.
On the investment side, recent financial sector volatility has delivered opportunity for non-bank lenders to deploy more capital. Today’s private lenders are remaining open and supportive, but with increased selectivity, explains Gornick pointing to Churchill’s focus on high quality borrowers with recession-resilient operating models. Due to higher base rates and wider spreads for senior secured debt, 2023 is shaping up to be a compelling vintage year, says Gornick. While recession risk, rising rates and inflation pressures will likely translate into higher default rates, diversification and manager selection is key to outperformance.
Churchill Asset Management is the exclusive manager of private capital for Nuveen and currently manages over $46 billion in committed capital. Specializing in private middle-market companies owned or controlled by private equity firms, Churchill touts deep relationships in the private equity community, which ultimately drives deal flow, investment activity, and scale.
Investments in middle market loans are subject to certain risks. Please consider all risks carefully prior to investing in any particular strategy. These investments are subject to credit risk and potentially limited liquidity, as well as interest rate risk, currency risk, prepayment and extension risk, inflation risk, and risk of capital loss. The views and opinions expressed are for informational and educational purposes only as of the date of production / writing and may change without notice at any time based on numerous factors, such as market or other conditions, legal and regulatory developments, additional risks and uncertainties and may not come to pass. This material may contain “forward-looking” information that is not purely historical in nature. Churchill Asset Management is a registered investment advisor and an affiliate of Nuveen, LLC. “Churchill Senior Lending” refers to the senior secured loan investment team and portfolio of Churchill Asset Management. This material is not intended to be a recommendation or investment advice, does not constitute a solicitation to buy, sell or hold a security or an investment strategy, and is not provided in a fiduciary capacity. The information provided does not take into account the specific objectives or circumstances of any particular investor, or suggest any specific course of action. Financial professionals should independently evaluate the risks associated with products or services and exercise independent judgment with respect to their clients. A word on risk Investments in middle market loans are subject to certain risks such as: credit, limited liquidity, interest rate, currency, prepayment and extension, inflation, and risk of capital loss. Nuveen provides investment advisory solutions through its investment specialists.
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