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Finding Opportunities in Alternative Credit
In the first quarter of this year, we saw a significant pull back in the credit markets with spreads widening to levels not seen since the Great Recession of 2008-2009. By the start of Q2, markets would have had to experienced historically high default rates with historically low recoveries never before experienced for principal to have become impaired. As government stimulus poured in and the markets started to recover, these worst case scenarios have not come to pass.
Only four times in the last 30 years have credit spreads breached 1,000 bps like they did earlier this year, and each time, returns were very attractive over the following 12-24 month periods actually outpacing stocks, investment grade bonds, and commodities. South Coast will be hosting a Zoom Webinar with Griffin Capital to discuss the Griffin Institutional Access Credit Fund sub-advised by Bain Capital exploring ways to allocate to this space.
Credit refers to the market through which companies and governments issue debt to investors, such as investment-grade bonds, junk bonds, and short-term commercial paper. Alternative credit includes: bank loans, high-yield bonds, structured credit/collateralized loan obligations, middle-market direct lending and special situations (such as non-performing loans).