Private placement investments offer regular and stable cashflows, so are well suited to long-term institutional investors. They have a limited secondary market, so they are most appropriate for those for whom liquidity is not a primary concern and can adopt a buy and hold strategy.
Investors in private placements can typically benefit from:
- additional yield and better total return than comparable public bonds generated by illiquidity premium and fee income*
- enhanced structural protection
- diversity of opportunities through exposure to companies not found in bond indices
- higher recovery rates than public bonds**
*Source: M&G data as at 30 June 2020
**Source: Society of Actuaries 2019 (covering years 2003 to 2015) and M&G data as at 30 June 2020