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Leverage in private markets

clock • 1 min read

Investors, driven by depressed interest rates, slower global economic growth and rich equity market valuations are examining non-traditional investment opportunities.

The alternative asset management universe has grown significantly over the past few years, managing $8.8 trillion (tn) as at the end of 2017. Putting this in context, total world equity market capitalisation stood at $81tn on the same date. By March 2018, those managers held $2tn of this total in cash awaiting investment. While this is a large absolute amount, it is a slightly lower-than-average proportion of assets under management. 

Unhealthy lending practices?

One common underlying feature of alternative investment strategies is leverage. Increasingly, investors have been investing in alternative credit funds, or making their own private lending deals. Corporate lending, particularly leveraged loan lending, has led current and former policymakers to draw attention to unhealthy lending practices that have become more common.

 

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Important information
Investors should be aware that past performance is not a guide to future results. The value of investments, and the income from them, can go down as well as up and investors may get back less than the amount invested.

Aberdeen Standard Investments is a brand of the investment businesses of Aberdeen Asset Management and Standard Life Investments.

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