Private debt and real assets could present investors with attractive opportunities during the pandemic, an asset manager has suggested.
David Bouchoucha, chief investment officer of private debt & real assets (PDRA) at BNP Paribas Asset Management, said that many investors, such as pension funds, are looking for alternative assets when seeking yield.
Because private debt and real assets are resilient, they are attractive options during the ongoing Covid-19 crisis, he added.
“You can expect a general repricing of risk as the perception of risk changes, as you would in any crisis, which is good for investors as it can create attractive opportunities to enter the asset class,” he said in an article on BNP Paribas’ blog, called Investors’ Corner.
Bouchoucha added that private debt and real assets offer investors diversification opportunities.
“It is an asset class that involves investing in durable assets across economic cycles, in assets offering a liquidity premium and a risk premium over other (fixed income) assets, and in assets with predictable cashflows and thus offering a steady income,” he said.
With yields likely to stay low for longer due to central bank and government support, patient and selective investors will wait for better prices and earn better returns, he said.
He added that investors seeking environmental, social and governance (ESG) factors when investing could also look to private debt.
However, he said there are challenges, for example, small- and medium-sized enterprises report less information, so it can be more difficult to judge whether they are performing well on ESG factors.
Bouchoucha said during Covid-19 there has been a focus on sustainability, with many stimulus programmes to support economies targeting energy transition and climate change, making these types of investments more attractive.
“Now more than ever, investors should aim for resilient, quality investments,” Bouchoucha said in the blog.
“Private debt and real assets fit that description well in our view.”