Tracing the Rise of Direct Lending: The Importance of Rates and Loan Structure

If passing the Dodd-Frank Wall Street Reform Act in July 2010 did not spawn direct lending, what did? In this analysis we explore the genesis of the recent direct lending phenomenon to identify risks to the strategy and what investors should watch going forward.

June 2017

Is Deregulation the Death Knell of Direct Lending? Reviewing the Evidence

Some market participants have feared the worst for direct lending from a potential repeal of The Dodd-Frank Wall Street Reform and Consumer Protection Act. In this brief, we review the data and show that changes in banks’ lending behavior cannot clearly be traced to the passage of Dodd-Frank or its implementation.

June 2017

Playing the Long Game—Should the US Treasury Issue Ultra-Long Bonds?

Yes. Issuance of ultra-long Treasury bonds (greater than 30 years to maturity, including potentially 40-, 50-, and 100-year maturities) would benefit multiple constituents. Ultra-long Treasuries would extend the investable Treasury curve for pension plans and life insurance companies that hedge long-duration liabilities. In addition, they would enhance the credit markets by improving price discovery for […]

June 2017

Does US Corporate Tax Reform Endanger Private Debt Strategies?

No. If the interest expense deduction is eliminated, debt issuance may drop slightly, but the demand for senior and mezzanine debt will be little changed, and the risk/reward proposition is still attractive for investors. Under the new tax regime outlined in the GOP’s Tax Reform Task Force’s Better Way “blueprint,” the highest corporate tax rate […]

March 2017

Don’t Forget the Credit Spread!

While corporate plan sponsors are keenly aware of interest rate risk within their defined benefit plans, few fully appreciate the complex and significant risk posed by credit spreads.

October 2016

Pension De-Risking in a Low-Rate Environment—A Better Solution

Defined benefit pension plans face ample challenges in the current environment of extremely low interest rates. Most agree that low yields have caused liability-hedging assets (longer-duration fixed income) to become overvalued when evaluated in isolation.

April 2013