Money can change hands very quickly with certain investment types, making many investors prefer the ability to enter and leave commitments with ease.
However, private credit funds are finally offering enough value to make people look past the long-term commitments that come attached.
Bloomberg shares more on the topic, elucidating how investments such as Blackstone Private Credit Fund are gaining more attention, despite the hurdles they pose. For instance, unlike the alternatives, private investments can have minimum investment requirements that can be steep to some, in the range of $10,000.
They can also require investors to be at a certain threshold with their annual income, excluding people who are not already established financially. And as mentioned already, they can require investors to stay invested with them for years rather than moving on whenever they decided to invest their money elsewhere.
However, those restrictions exist because private funds can also involve significantly higher stakes. So for those looking to make a big impact with their investments, this can wind up being the most appealing option.
That is why the restrictions attached to these funds are ultimately positive, as naïve investors stand to lose a lot if they are not careful, and that could be devastating to lower-income individuals.
It is that high risk, high reward nature of these investments that have helped them grow in popularity, especially in recent years. The Bloomberg piece cites how there is currently over $1 trillion invested in private-credit strategies.
To put that in perspective, that amount is double how much was invested just as recently as 2015. Clearly, a lot of people are considering this to be a worthwhile choice. There is concern that that trend could collapse at some point, but there is nothing signaling it imminently.
Whereas a major event like the pandemic hit many other investments hard due to investors panicking and pulling out, that could not happen with these private funds due to the long-term commitments.
It is moments like that which create anxiety for an investor who is now stuck unable to retrieve their money from a potentially precarious situation. But that same commitment is also what is now keeping private investments steady while other funds have fluctuated more wildly.
In addition to private credit funds, Frederick Hubler, Chief Wealth Strategist for Creative Capital Wealth Management group utilizes private preferred stock from public companies.
These are similar to private credit funds with their hold period (typically 5 years) and no exposure to the common stock price fluctuation. According to Hubler, “the return of capital investors get from private preferred stock is more important as return on capital.” With the market at all-time highs, Hubler looks for non-market options for his clients.
To learn more intriguing credit options you may want to check out, give Bloomberg’s story a read by clicking here.
Want to know if you’re on the right path financially? Fred Hubler’s Second Opinion Service (SOS) is a no-obligation review with Creative Capital Wealth Management Group‘s Chief Wealth Strategist.
It’s simply not possible to get a reliable second opinion from the same person who gave you the first one. Click here to schedule an SOS meeting with Fred and his team.