Multi-Strategy Private Credit
Unlock the full potential of Private Credit
Too big to be ignored
Private Credit has become an essential asset class to investors’ portfolios, but what exactly is it? We define Private Credit as any loan or debt instrument that is not listed on public financial markets. By nature, it is a highly diversified market, serving as an essential source of financing for the “real economy”, by addressing both the immediate and long-term capital needs of a diverse range of borrowers.
Households
Loans for house purchases, automobile financing, and personal loans.
Corporations
Loans for companies of all sizes, with a focus on mid-sized and small enterprises. It supports corporate investments, acquisitions, and debt refinancing.
Real Assets
Loans to fund the development of specific real assets such as commercial real estate and infrastructure projects.
Our approach
Since the financial crisis of 2008, the Private Credit market has grown significantly – especially as banks have been subject to tougher regulatory requirements that limit their lending ability.
We think the great opportunity for investors today is the possibility to access Private Credit, which had been the exclusive domain of banks. AXA IM Alts identifies two primary components within Private Credit:
Direct Lending
- Private credit funds provide loans directly to businesses, thereby substituting traditional banks. The primary focus areas for Direct Lending include the financing of mid-sized corporations and real assets.
Asset-Backed Finance
- In this framework, banks extend loans and subsequently transfer the associated credit risk by packaging and selling these loans, in various forms, to private credit funds. Asset-Backed Finance has grown into a vital strategy for banks to optimize capital requirements and mitigate credit risk while maintaining their lending capacity.
Private Credit represents a broad and diverse market, encompassing a range of underlying assets with distinct risk-return profiles. These assets may perform differently depending on the prevailing phase of the credit cycle, which in our view makes diversified allocation across the asset class a compelling investment opportunity.
The benefits of adding Private Credit in a portfolio
A key characteristic of Private Credit is its income profile, which is derived from regular interest payments on loans. This generates a consistent income flow that can be attractive to many investors.
The second characteristic of the asset class is the potential yield premium over Public Credit. Private credit assets require a premium for long-term capital commitment, as they have lower trading liquidity than public bonds.
The diversification benefits represent another significant feature of Private Credit. Due to their non-listed nature, private credit investments are generally less susceptible to fluctuations in financial markets compared to Public Credit. Consequently, private credit assets tend to focus more on the fundamentals of the borrower, allowing for a clearer understanding of the investment and exhibiting a low correlation to public markets.
As with any yielding asset class, Private Credit embeds some risks. Economic downturns and unforeseen events can impact borrower’s ability to repay loans. To mitigate this risk, we think it is essential to build a well-diversified portfolio across main private credit sub-asset classes.
In summary, Private Credit can contribute to reducing overall portfolio volatility and enhancing risk-adjusted returns, albeit at the cost of lower liquidity compared to Public Credit.
Why AXA IM Alts?
AXA IM Alts boasts a strong track record in private credit. Over the years, the firm has cultivated comprehensive in-house investment capabilities, resources, and processes across key private credit asset classes. This enables AXA IM Alts to effectively source, select, and monitor a diverse array of private credit investments, which we consider essential for managing a multi-strategy private credit portfolio, ensuring appropriate levels of control and oversight on behalf of our clients.
Since 2018, AXA IM Alts has been managing multi-strategy portfolios in private credit through closed-end vehicles and is now pleased to extend this expertise into open-end evergreen formats.
The management of multi-strategy private credit portfolios is entrusted to a dedicated investment team comprised of experienced professionals. This team leverages a global team of experts specializing in each sub-investment strategy, harnessing the strengths of the AXA IM Alts Private Credit Platform.
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Disclaimer
This marketing communication does not constitute on the part of AXA Investment Managers a solicitation or investment, legal or tax advice. This material does not contain sufficient information to support an investment decision.
Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.