Research reveals Family Offices are planning to increase their exposure to private debt

Terry Spruce
By Terry Spruce July 2, 2019 11:51

Research reveals Family Offices are planning to increase their exposure to private debt

New research 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, fast growing 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.

Shearwater offers a variety of services across the private aviation industry. This includes:

Aircraft financing: Asset based financing on business jet aircraft for clients across the globe.

Appraisal and Valuation Services: All of its appraisals are USPAP compliant and performed by an accredited Senior Aircraft Appraiser by the American Society of Appraisers (ASA).

 

Terry Spruce
By Terry Spruce July 2, 2019 11:51

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