Private Debt

An essential resource for creating outsized returns in the private debt markets

In Private Debt II: Finding Yield in a Zero Interest World, renowned investment advisor and industry leader Stephen Nesbitt delivers yet another essential resource for investors seeking to acquire private debt options in the investment market, including corporate direct lending, asset-backed lending, mezzanine lending, royalties, venture debt, structured credit (CLOs), specialty finance, and structured equity.

Building on the success and popularity of Private Debt: Opportunities in Corporate Direct Lending, this latest edition of the author’s flagship text helps readers understand this complex and rapidly growing asset class. The book also offers:

• Explorations of the opportunities, relevant risks, and historical yield provided by private debt
• Discussions of a variety of loan investment vehicles, including the Business Development Company structure
• Strategies for structuring a direct loan portfolio and how to fit it into your overall investment strategy

A can’t-miss resource for serious investors looking for opportunities to earn higher yields than those offered by traditional index funds while still retaining reasonable safety of principle and liquidity, Private Debt II will undoubtedly become the go-to guide for anyone looking for tried and tested debt investment strategies.

Introduction

Acknowledgments

About the Author

Chapter 1: Overview of U.S. Middle Market Corporate Direct Lending

Chapter 2: The Historical Performance of U.S. Middle Market Direct Loans

Chapter 3: Performance Comparisons to Other Asset Classes

Chapter 4: Current Yield or Yield-to-Maturity?

Chapter 5: Comparative Credit Loss Rates

Chapter 6: How Liquid Are Direct Loans?

Chapter 7: Middle Market Loans as a Hedge Against Rising Interest Rates

Chapter 8: Credit as a Separate Asset Class

Chapter 9: Senior and Unitranche Direct Lending

Chapter 10: Loans and the Theory of Credit

Chapter 11: Risk Premiums in U.S. Middle Market Lending

Chapter 12: Covenants and the Loan Agreement

Chapter 13: Should Direct Loan Portfolios Be Leveraged?

Chapter 14: The Democratization of Alternatives

Chapter 15: Business Development Companies (BDCs)

Chapter 16: Interval and Tender Funds

Chapter 17: Selecting Direct Lending Managers

Chapter 18: Loan Valuation

Chapter 19: Investment Fees

Chapter 20: Portfolio Construction

Chapter 21: Expected Returns and Risks from Direct Lending

Chapter 22: Asset Allocation

Chapter 23: All-Weather Private Debt

Chapter 24: Enter SOFR

Chapter 25: European Middle Market Direct Lending

Chapter 26: The Borrower’s Perspective

Chapter 27: Enhanced Lending

Conclusion

Index

STEPHEN L. NESBITT is Chief Executive Officer and Chief Investment Officer of Cliffwater LLC, an investment advisory firm specializing in alternative investments, including private debt, hedge funds, private equity, real estate, and infrastructure.

In the Second Edition of Private Debt: Yield, Safety and the Emergence of Alternative Lending, celebrated investment advisor and industry leader Stephen Nesbitt delivers the latest installment in an essential resource for investors looking to acquire private debt options in the investment market. Corporate direct lending, asset-backed lending, mezzanine lending, royalties, venture debt, structured credit (CLOs), specialty finance, and structured equity are all covered in the text.

Building on the popularity and success of the author’s seminal 2019 text helps potential investors understand this complex and rapidly growing asset class. In this fully revised and updated book, you’ll find explorations of the opportunities, risks, and historical yield offered by private debt investing and discussions of a variety of loan investment vehicles—including the Business Development Company structure. You’ll also discover strategies for structuring a direct loan portfolio and how to fit it into your overall investment strategy.

Private Debt, Second Edition demonstrates how to grow the size of your 401k and generate income you can live on using methods and strategies tested over multiple market cycles and proven to earn yields of between 7% and 11%. The book covers niche and specialty categories of private debt, including pharmaceutical, entertainment, and sports royalties.

An indispensable blueprint for serious investors looking for opportunities to earn higher returns than those offered by traditional index funds while still retaining reasonable safety of principle and liquidity, Private Debt, Second Edition will become the go-to guide for anyone seeking proven and tested debt investment strategies.

PRAISE FOR PRIVATE DEBT, SECOND EDITION

“Steve Nesbitt has been a consistent thought leader in the private credit space. From his front row seat, Nesbitt offers valuable insights into the world of corporate lending. Private Debt is a must-read for anyone looking to gain a deeper understanding of this growing and ever-evolving asset class.”
— Michael Arougheti, Co-Founder, CEO, and President, Ares Management Corporation

“Steve Nesbitt has been at the forefront of the private credit industry throughout its evolution from a tactical portfolio allocation into a strategic asset class. No one in the space has a more comprehensive perspective of the landscape or a more nuanced understanding of the drivers of performance.”
—Michael Patterson, Managing Director, HPS Investment Partners, LLC

“The education and leadership that we see in the material that Steve Nesbitt produces is helping accelerate the secular shift towards private credit. He excels at providing both institutional and individual investors greater transparency and insight to the asset class.”
— Brad Marshall, Senior Managing Director and Head of North America Private Credit; CEO, Blackstone Private Credit Fund (BCRED), Blackstone Inc.

“Steve Nesbitt has not only advanced the understanding of credit and alternative lending with Private Debt, but has also walked-the-walk by helping both the largest and smallest investors access this fast-growing asset class.”
— Edward Mulé, Founding Partner, Portfolio Manager and CEO, Silver Point Capital, LP