The returns to private debt: primary issuances vs. secondary acquisitions

Douglas Cumming, Grant Fleming, Zhangxin Liu

Research output: Contribution to journalArticle

Abstract

Private debt fund managers invest in debt positions of private companies through (1) new issuances or (2) secondary acquisition of loans. In the study reported here, we used data from more than 400 investments into private companies in 13 Asia-Pacific markets between 2001 and 2015 to examine which strategy performs best. Conditional on market and industry factors, trading private debt delivers higher returns than buying and holding a primary issuance. So, institutional investors should permit fund managers investment flexibility to trade. Furthermore, a portfolio of private debt investments delivers excess returns to public markets over time, with excess returns affected by volatility, funding liquidity, and the global financial crisis. An investment in Asia-Pacific private debt should improve risk-adjusted returns for a global or emerging market fixed-income portfolio.
Original languageEnglish
Pages (from-to)48-62
Number of pages15
JournalFinancial Analysts Journal
Early online date24 Jan 2019
DOIs
Publication statusPublished - 24 Jan 2019

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Private debt
Asia-Pacific
Fund managers
Private companies
Excess returns
Factors
Industry
Risk-adjusted returns
Loans
Emerging markets
Global market
Funding
Institutional investors
Liquidity
Fixed income
Debt
Global financial crisis

Cite this

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The returns to private debt : primary issuances vs. secondary acquisitions. / Cumming, Douglas; Fleming, Grant; Liu, Zhangxin.

In: Financial Analysts Journal, 24.01.2019, p. 48-62.

Research output: Contribution to journalArticle

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