Portfolio Insight – Secure income


For Professional Clients only.


It is pleasing to note that whilst the world has been reeling from the pandemic, which has caused a lot of short and, potentially, long-term changes, private markets have continued to operate as we anticipated.


Since we last spoke in April, what has changed in the private markets? Has any- thing happened that you did not expect? It is pleasing to note that whilst the world has been reeling from the pandemic, which has caused a lot of short and, potentially, long-term changes, private markets have continued to operate as we anticipated.


Overall, private markets continue to offer an excellent opportunity to put money to work and generate strong returns relative to those available in the public markets. We have seen a range of pricing, with some deals 0ffering as much as 100 basis points above public bonds, which in the current environment demonstrates sig- nificant value.


Yields have not compressed to the extent they have in the public markets, which have felt the weight of a significant supply


24 | portfolio institutional September 2020 | issue 96


and demand imbalance from institutional investors. That compression of spreads has been amplified by central bank pur- chase programmes. Within private corporate markets, in the context of quieter markets generally, issu- ance picked up from May onwards. That was driven initially by the US with the UK following thereafter. We have been able to deploy across the maturity curve over that period for our clients.


If we breakdown the sub-sectors that we look at, the infrastructure space has remained more subdued compared to the activity witnessed before the crisis. The market has focused on existing assets and sectors that have been more effected by the crisis, such as transport. We are continuing to see opportunities across the renewable space, where we have put money to work.


Also, in the network-related spaces, which links into a potential dynamic that we dis- cussed during our last call where more and more people are working remotely. Finally, real estate debt has remained much quieter generally. However, we are currently seeing a healthy pipeline of opportunities across a variety of sectors. It is the quietest of the markets we look at, but a healthy pipeline is building.


How is the crisis impacting the banks? Have you seen a marked change in their appetite for lending? A lot of banks are stepping up to the plate to support issuers whose cash-flows were effectively halted overnight by the pan- demic. We are now seeing a discrimina- tion, so to speak, on lending decisions as bad debt provisions have increased across the industry.


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