SCIO News

& Insights

4 min read

May 14, 2024

Most investment professionals embrace diversification, or the concept of spreading risk across multiple investments, as a key tenet of portfolio risk management. Indeed, diversification is a key consideration, according to modern portfolio theory, when constructing an ‘optimised portfolio’ which maximises return versus risk. Over-diversification, on the other hand, can prove problematic, resulting in increased costs, additional due diligence and operational burdens, and a reduction in a portfolio’s overall risk-return characteristics. We demonstrate that allocating to private credit can be a highly-effective risk management tool owing to private credit’s lower correlation to public markets, ability to protect against downside risks as well reduce portfolio exposure to market volatility.

4 min read

May 14, 2024

Over the past decade the European private credit market has skyrocketed (480 per cent value increase1) as banks, hobbled during the debt crisis, scaled back lending and alternative lenders stepped in to fill the financing gap. It is our considered view that sustained growth in the private credit market is set to continue, driven by private credit’s significantly higher returns and lower volatility compared to public credit. Accessing private credit investments presents a challenge to investors, given these investments are by their very nature ‘by appointment only’ and a secondary market does not exist. To gain market access, investors rely on fund products offered by specialists who are capable of sourcing and managing these assets.