Group Co.
Family Offices Look Further into Private Debt
Traders Magazine Online News, July 11, 2019
New research(1) from Shearwater Aero Capital, the global corporate aviation finance specialist, reveals family offices and wealth managers are expected to increase their exposure to private debt over the next two years.
A survey of these institutions reveals that 63% anticipate their sectors will invest more in private debt between now and 2021, with only 13% anticipating a decline.
In terms of why they will increase their exposure to this asset class, 53% said it’s because it offers attractive returns in a low interest environment, followed by 27% who said it’s a result of bonds offering meagre returns. Some 16% said it will increase because stock markets will become more volatile.
Last month, Shearwater Aero Capital announced it’s in the process of welcoming additional capital sources to diversify its investor base and keep up with demand.
Funding is relatively low risk with an average loan to value of 65%. To date, Shearwater has provided funding for over $100 million in aircraft.
Chris Miller, Managing Partner, Shearwater Aero Capital, said: “Our research shows family offices are placing a greater focus on investing private debt, and we are certainly seeing this through our fund raising.
“Family offices currently have around 10.7% of their AUM in private debt, but our research shows that 32% of family offices and wealth managers interviewed expect this to be over 12% by 2022.”
When asked what the most attractive features of private debt are, 70% of family offices and wealth managers interviewed cited its ability to provide higher returns than other asset classes (27% said this was ‘extremely attractive’) followed by 66% who said its increased flexibility compared to other asset classes. 61% said the fact that private debt offers fewer restrictions than other asset classes was attractive, and 59% cited that it’s a great way to diversify portfolios.
Attractiveness of key features of private debt |
Percentage of family offices and wealth managers who said this is ‘extremely’ attractive |
Percentage of family offices and wealth managers who said this is ‘moderately’ attractive |
Percentage of family offices and wealth managers who said this is attractive |
Provide higher returns than other asset classes |
27% |
43% |
70% |
Increased flexibility compared to other asset classes |
14% |
52% |
66% |
There are fewer restrictions |
16% |
45% |
61% |
Great way to diversify portfolios |
7% |
52% |
59% |
2018 was Shearwater’s strongest yet accounting for 60% of the Company’s business since its launch in 2014. Last year, its average loan size was approximately $7 million. It has provided asset-based loans from $1.5 million to $15 million for a range of aircraft from a Hawker 400XP to a Bombardier Global 5000. Its average loan to value is 65% and has financed clients in Asia, the Middle East, Africa and the USA.
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