NEW YORK, Nov. 8, 2016 /PRNewswire/ -- CEPRES today released an analysis demonstrating how Private Credit strategies add alpha to institutional portfolios, while delivering current income that can help alleviate excess liabilities for pensions. Using PE.Analyzer to analyze 6,284 deals from 385 private credit funds, CEPRES found that private credit delivered gross alpha of 12.4% versus both stocks and high yield bonds. It is also a great defensive strategy for investors worried about market stress because it has very low market correlation.
The results were derived from the new PE.Analyzer 'Alpha Beta Framework' that uses regression analysis to calculate the risk adjusted returns (alpha), together with the correlation (beta) to an underlying market – in this case high yield. This new feature is ground breaking bringing technical analysis familiar to public market investors, to the desks of private market decision makers.
- Risk adjusted alpha for Private Credit versus High Yield Corporate Bonds = 12.4%
- Beta correlation for Private Credit versus High Yield Corporate Bonds = 0.2
- Private Credit delivers current income and can help alleviate underfunded pension plans
- Different sub-segments, such as senior vs subordinated, sponsored vs unsponsored can offer different alpha and beta to fit varying risk/return appetites
"Private credit, as a yielding asset, is a great addition to underfunded pension plans with demand for current income, but seeking higher returns than traditional fixed income can deliver. For those especially worried about volatility and downward pressure on public markets, PE.Analyzer shows that private credit can help defend against market risk and enhance a balanced portfolio. Unitranche and subordinated strategies may be more suitable for investors seeking stronger alpha at the cost of a slight increase in risk, whereas senior strategies are better suited to core fixed income investors who value certainty of returns and low volatility above absolute returns. Further variations for other sub-segments and comparison to other markets can all be done in PE.Analyzer."
Dr. Daniel Schmidt – CEO, CEPRES GmbH
PE.Analyzer is an online investment decision platform. It encompasses deep analysis of 38,000 private equity funds, deals and assets with a total Enterprise Value of $2.8 trillion USD. It is the only platform providing Technical & Fundamental benchmarking of track records to institutional investors and fund managers to underwrite their decisions and prove their investment strategy.
CEPRES is an innovative FinTech company helping institutional investors invest in Private Equity with the proficiency of Financial Markets. Investors (LPs) and fund managers (GPs) can interact on a single, confidential platform in complete privacy. LPs gain deep market insights, forecast investment outcomes and enhance due diligence to drive better investment returns. GPs can verify their track record, precisely benchmark their deals and find new sources of capital from around the world. 100's of institutional investors have conducted due diligence on $1.7 trillion of Buyout, Growth, Venture, Private Debt, Infrastructure and Real Estate funds via the CEPRES platform. For further information, visit www.cepres.com.