MIAMI , April 24, 2024 /PRNewswire/ — Crystal Capital Partners, a wealth-tech provider and leading turn-key alternative investment platform for financial advisors, today announced the results of its thematic survey of financial advisors on its platform, revealing strong demand for private credit strategies. Notably, a majority of respondents are looking to reallocate some portion of their existing public fixed-income exposure to private credit, in particular direct lending, to take advantage of better risk-adjusted return expectations, diversification benefits, and the potential for higher yields.
The survey, completed by over 50 prominent independent financial advisors, was launched to gain a deeper understanding of advisor sentiment on private credit, including why advisors were allocating to the asset class and how much they would continue to do so.
The survey revealed the following:
- Current and future demand: Over 20% of advisors said they had “significant” exposure to private credit within their client portfolios, while over 45% said they had “minimal” exposure. Almost 30% said they had no exposure. Over 60% said they were looking to increase exposure to private credit this year.
- Allocation trends: Of those who said they were looking to increase their exposure, over 35% said they are allocating with new money, while over 5% said they are reallocating from other alternative asset classes (e.g., private equity or hedge funds). 35% said they were currently planning to reallocate up to 10% of their clients’ portfolios from public fixed income to private credit, over 15% said they were looking to reallocate up to 25% from public fixed income, and under 5% said they were looking to reallocate 50% or more from public fixed income.
- Barriers: Of those who said they were not looking to increase their exposure, almost 70% said it was due to perceived higher risk, over 45% said it was due to client preferences, and almost 40% said it was due to lack of familiarity with private credit. Others answered that it was due to sufficient performance of public fixed income (over 15%) and the economic/market outlook favoring public fixed income over private credit (over 5%).
- Upcoming commitments: Of those already invested in private credit, over 45% said they will invest the same amount in new vintages, over 25% said they would invest but with less capital, almost 10% said they will invest more, and over 15% said they will not invest in new vintages.
- Incentive for future allocations: When asked which factors influence their decision to include private credit strategies in their investment allocations, the three most common answers were high yield potential (80%), better risk-adjusted returns (80%), and diversification benefits (over 70%). Other answers included long-term investment horizons (i.e., illiquidity was not a concern) (almost 30%), inflation hedge (25%) and client demand (20%).
- Sub-strategy demand: The specific types of private credit that advisors find particularly appealing are direct lending (50%), real estate debt (over 25%), and mezzanine debt and special situations (both over 20%). Other answers included distressed debt (almost 20%), infrastructure debt (almost 15%), and venture debt (5%). Over 40% said they had no preference.
Steven Brod, Senior Partner, Chief Executive Officer, and Chief Investment Officer of Crystal Capital Partners said: “Private credit has been the most popular private markets strategy on our platform by far over the past year, and we saw a 30.52% year-on-year growth to December 2023 in allocations. The strategy has exploded in popularity as a traditional fixed-income replacement and alternative source of funding. We anticipate continued high demand as financial advisors benefit from variable rate term sheets and address interest rate risk in their portfolios.”
About Crystal Capital Partners
Crystal Capital Partners is a turn-key alternative investment platform, providing financial advisors exposure to third-party institutional private markets and hedge funds for their QP clients’ portfolios. Crystal’s clients include independent advisors, foundations, regional banks, IBDs, and single/multi-family offices. The company’s tenured experience in the alternative investment industry, coupled with decades of technology innovation, provides financial advisors with the front/back-office infrastructure needed to source, build, manage, and maintain bespoke alternative investment portfolios. Crystal is a Registered Investment Advisor headquartered in Miami, Florida.
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SOURCE Crystal Capital Partners
