Does a slowing economy increase the risk of loan defaults in private debt?

Well-run private debt funds use rigorous scenario testing and real-time monitoring to mitigate risks. Historical net write-offs by banks peaked at just 0.68% during the GFC and were 0.04% in September 2024, demonstrating strong resilience across economic cycles.

Does a loan default always result in a credit loss?

No. Private debt investors are protected by their seniority in the capital structure. Senior debt holders get repaid first, before subordinated debt, preferred equity, and common shareholders. Covenants and controls act as early warning signals allowing lenders to engage with borrowers to mitigate financial loss.

Are all private debt managers the same?

No. Private debt managers differ significantly in scale, credit skills, and experience. Quality managers need sizable assets under management, bank-level credit skills, extensive networks, and the ability to directly originate and diversify loans across borrowers to achieve optimal outcomes.

Does commercial real estate debt put capital at risk in a property downturn?

Property owners face greater risk than lenders. With typical loan-to-value ratios of 60%, owners' equity acts as a buffer. Even if property values fall significantly, lenders can compel borrowers to restore their position or pursue asset sales to maximize recovery without necessarily incurring losses.

Are non-bank lenders lenders of last resort?

No. Competent private debt managers lend to quality companies and often compete with banks or work alongside them in lending syndicates. Post-GFC regulations requiring banks to hold more capital have created financing gaps that private debt fills for established companies with sound fundamentals.

Responsible Investment, Environmental, Social & Governance (ESG) Policy update

Metrics is pleased to present our Responsible Investment, Environmental, Social and Governance Policy, updated in July 2024.

Key enhancements are to incorporate our Fossil Fuel Investment Policy (adopted in October 2022) and make public our definitions for the activities we negatively screen. The policy applies to all of our funds.

At Metrics, we believe that ESG issues present both risks and opportunities that can impact the performance of our funds and the long-term, risk-adjusted returns we deliver to our investors.

As such, we are committed to acting in the best long-term interests of our investors, recognising that as a fund manager, our primary influence on the real world is through the entities in which we invest.

Read Now

03 July 2024

Email us
invest@metrics.com.au

1300 010 311
Mon-Fri 9:00 - 5:30