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| Type | Bachelor's Thesis |
| Scope | Discipline-based scholarship |
| Title | Reasons and Expectations from Private Debt Investments A Survey |
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| Institution | University of Zurich |
| Faculty | Faculty of Business, Economics and Informatics |
| Number of Pages | 60 |
| Date | 2019 |
| Zusammenfassung | Since the financial crisis in 2008, private debt has been on the rise (Preqin (2018a)). Although private debt was an investing instrument for a long time, only recently has Europe seen an increasing volume of funds raised (Johnson and Topor (2017)). This raises the question, why do Swiss institutional investors allocate assets in private debt? What are the reasons for this and what do they expect from private debt investments? This thesis provides an overview of the academic literature on this subject and investigates those theories on behalf of gathered primary data. To achieve this, a survey was conducted among Swiss institutional investors. The questionnaire pursues qualitative as well as quantitative questions surrounding reasons and expectations from private debt investments. Through this, the thesis aims to create a link between the academic and practical approach to private debt. In this thesis, the quantitative expectations of the participants are presented and compared to market data and numbers from research. Furthermore, the author finds in the analysed literature that there are multiple reasons either promoting or hindering private debt investments, which then are tested with the gathered data. As expected, most of them are confirmed by the ascertained data. One aspect of private debt investments, the low correlation of the returns to those of other asset classes, provides an opportunity to diversify one’s portfolio. The attractive return numbers, which are rendered even more appealing by the nowadays low interest rate environment supplement the incentives to invest in private debt. However, as expected based on theory, not all aspects of private debt promote investments. For one thing, the due diligence hinders investors from allocating assets in private debt. The author assumes that there is a connection between this and the also found positive relationship of assets under management and allocation to private debt. In other words: size-effects may be an issue. Furthermore, the liquidity profile is seen as negative aspect of private debt investments by a significant part of the participants. But this may not hinder all investors, as many pursue a long-lasting relationship with the borrower to account for the extensive investment process. There are also certain aspects from literature, suggesting supporting or hindering private debt investments, that are not confirmed by empiricism. When it comes to the quantitative expectations of the investors towards their private debt investments, the complex and heterogeneous nature of private debt investments is reflected in the diverse range of anticipations. Finally, the findings are commented, validated and discussed by analysing round-up questions, which conclude the results. |
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