
Investment Grade Private Credit
IG private credit can offer attractive yields, diversified exposures, robust downside covenant protection and a surprising amount of liquidity
Overview
In today’s ever-evolving market landscape, investors are under constant pressure to find diversified investment opportunities that carry both higher potential returns and lower downside risk. As the investment grade (IG) private credit market expands in breadth and depth, it offers a compelling value proposition relative to public markets in both standalone and more solutions-oriented allocations.
Value of allocating to IG private credit
Up to +150 bps on average1
Covenants can provide additional return over life of the deal via covenant-driven lifecycle payments:
- Coupon step-ups
- Amendment & waiver fees
- Ancillary fees
- Credit event-related income
- Make-whole / early prepayment protection
Minimal public overlap:
- Issuer
- Sector
- Geography
- Maturity
- Fills 10- to 30-year demand
Typical recovery rate: 85% vs. 40% in public market2
- Downside & event risk protection via a more robust covenant package than the public market
- Early intervention with deteriorating credits
- Market is heavily skewed towards senior secured issuances
- Issuer market reliance drives good behaviour
Our capabilities
At LGIM America, our clients are offered four distinct verticals to invest, all of which may allow for better liquidity management that facilitates better risk-adjusted returns:
Corporate debt
Lending to companies who seek to borrow outside the public markets
Infrastructure debt
Financing a range of projects in sectors such as transport, energy, social, digital, municipalities and not-for-profits
Alternative debt
Diverse alternative finance strategies including structured credit, fund finance and unique securitizations
Real estate debt
Senior commercial mortgage loans (CML’s) secured against commercial property: multifamily, industrial, office, retail and storage
Solutions designed for your needs
Our IG private credit solutions are designed to your specific client needs:
Enhancing existing strategies
Incorporating into traditional public credit strategies or custom credit portfolios (i.e., buy and maintain / cashflow matching)
Opportunistic portfolio construction
Reallocating from public to private fixed income as preferred deals come to market
Dedicated portfolios
Providing exposure into hard to access sectors such as infrastructure (energy, social), sports media and other consumer industries
Benefits of working with us
LGIM America believes the following set us apart from our competition:
Enhanced returns
Our strategies – customized for our clients’ unique appetites – have delivered 50 basis points+ of spread relative to public comparables (plus varying degrees of value-add covenant packages).3
Experienced professionals
Our buy-and-hold philosophy is supported by robust research and managed by a senior investment team with average experience of over 26 years.4
Unique market access
Relationships drive private markets, and our experience as anchor investors in many transactions (both in terms of complexity and size) may give us unique market access. We continue to build a robust network of industry relationships, possibly giving our clients privileged access to deals and bespoke structures that could otherwise be beyond their reach.
1. BAML and LGIM America calculations using public index references - ICE BAML corporate indices (blend of C0A1/2/3 to align with NAIC-1 & C0A4 aligned with NAIC-2) as of September 30, 2024. NAIC: National Association of Insurance Commissioners.
2. Agency standard recovery estimation for corporate bonds as well as the Society of Actuaries 2003-12 Credit Loss Experience Study: Private Placement (IG private credit) Bonds. Recovery on an unadjusted basis.
3. LGIM America. Information as of March 31, 2024. LGIM America inception date March 2017. Population includes all LGIM America private debt inclusive of real estate debt.
4. As ofJune 30, 2024.
LGIMA leverages the long-established business model and resources of its affiliate, LGIM, to support LGIMA’s efforts in delivering Private Market strategies.
The material in this presentation regarding Legal & General Investment Management America, Inc. (“LGIMA”) is confidential, intended solely for the person to whom it has been delivered and may not be reproduced or distributed. The material provided is for informational purposes only as a one-on-one presentation, and is not intended as a solicitation to buy or sell any securities or other financial instruments or to provide any investment advice or service. LGIMA does not guarantee the timeliness, sequence, accuracy or completeness of information included. The information contained in this presentation, including, without limitation, forward looking statements, portfolio construction and parameters, markets and instruments traded, and strategies employed, reflects LGIMA’s views as of the date hereof and may be changed in response to LGIMA’s perception of changing market conditions, or otherwise, without further notice to you.
Accordingly, the information herein should not be relied on in making any investment decision, as an investment always carries with it the risk of loss and the vulnerability to changing economic, market or political conditions, including but not limited to changes in interest rates, issuer, credit and inflation risk, foreign exchange rates, securities prices, market indexes, operational or financial conditions of companies or other factors. Past performance should not be taken as an indication or guarantee of future performance and no representation, express or implied, is made regarding future performance or that LGIMA’s investment or risk management process will be successful.
In certain strategies, LGIMA might utilize derivative securities which inherently include a higher risk than other investments strategies. Investors should consider these risks with the understanding that the strategy may not be successful and work in all market conditions.
Reference to an index does not imply that an LGIMA portfolio will achieve returns, volatility or other results similar to the index. You cannot invest directly in an index, therefore, the composition of a benchmark index may not reflect the manner in which an LGIMA portfolio is constructed in relation to expected or achieved returns, investment holdings, portfolio guidelines, restrictions, sectors, correlations, concentrations, volatility, or tracking error targets, all of which are subject to change over time.
Unless otherwise stated, references herein to “LGIM”, “we” and “us” are meant to capture the global conglomerate that includes Legal & General Investment Management Ltd. (a U.K. FCA authorized adviser), LGIM International Limited (a U.S. SEC registered investment adviser and U.K. FCA authorized adviser), Legal & General Investment Management America, Inc. (a U.S. SEC registered investment adviser) and Legal & General Investment Management Asia Limited (a Hong Kong SFC registered adviser). The LGIM Stewardship Team acts on behalf of all such locally authorized entities.