February 28, 2019
In the past, institutional investors could rely on yield from fixed-income products or dividends from public equities to meet their short-term liquidity needs. But with yields on public equities below those of government bonds, institutional investors are looking to private markets to satisfy their short-term liquidity needs. Private debt and real assets may not deliver the same returns as private equity, but they can generate the income that cash-strapped investors crave.
While yield-based asset classes have inherited many of the traits that are common in private equity partnerships, investors in these asset classes have worked with GPs to make income generation a priority. NAV limits, deferred carry, and hard hurdles are but some of the features we look for in yield-based agreements.
John Bohill from StepStone’s private debt team explains the role that yield-generating asset classes have played in the growth of private markets.