Officials at PSP Investments expect its year-old private debt allocation to be one of its “fastest growing and best performing asset classes,” said Andre Bourbonnais, president and CEO of the firm that manages the assets of the C$112 billion ($89.2 billion) Public Sector Pension Investment Board, Montreal.
Speaking on a panel Tuesday at the Milken Institute Global Conference in Beverly Hills, Calif., Mr. Bourbonnais said that demand will continue to rise for loans, especially now that banks are doing less lending in light of increased regulation.
“There will be demand for leveraged loans by all sizes of companies,” he said.
Also, existing corporate debt will have to be refinanced as the loans come due, and mergers and acquisitions will lead to an increased need for loans, he said.
Mr. Bourbonnais said that when he joined PSP Investments from the Canada Pension Plan Investment Board in March 2015, he noticed that PSP did not have a private debt allocation. Private debt was the most successful asset class at CPPIB, said Mr. Bourbonnais, who was senior managing director and global head of private investments at the Toronto-based board.
Investors are adding private debt to their asset allocations, said Michael Arougheti, co-founder, director and president, Ares Management, who spoke on the same panel. “Capital is actively allocating into private debt,” Mr. Arougheti said.
PSP's Mr. Bourbonnais added that private debt is the asset class investors are looking to for yield in a low-return world.