Invesco's private credit investment strategies
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Invesco's private credit investment strategies

Invesco Private Credit is one of the world’s largest and longest-tenured private credit managers.

Our private credit strategies

Invesco is one of the world’s largest and most experienced private credit managers, catering to a wide range of client objectives and risk tolerances

We follow a consistent, conservative credit process centred on due diligence, conservative underwriting, and risk mitigation. The idea is to preserve capital while targeting attractive risk-adjusted returns. 

  • Broadly syndicated loans

    We use our credit expertise and market-leading position to provide investors unique access to attractive investment opportunities in senior secured loans. Our presence across all distribution channels means we are always active in the market and able to get an early look at attractive primary and secondary opportunities. Finally, our private-side orientation gives our analytical team an information advantage and edge in credit evaluation and execution relative to competitors.

    Senior loans offer a combination of appealing characteristics across a range of market environments:

    • High income: Senior loans offer the potential for consistent monthly income and strong risk-adjusted returns. The goal is to provide high, stable income throughout all market environments.

    • Floating rate feature: Loans have virtually no interest rate risk and instead benefit from rising rates through coupons resetting higher. 

    • Compelling relative value: Senior loans offer one of the highest yields across fixed income, as well as having almost no duration risk and being senior secured in the capital structure.

    • Diversification potential: Senior loans have a low correlation with traditional assets like equities and bonds. Historically, adding loans to an investment grade portfolio has reduced portfolio volatility and increased returns.

    • Senior secured status: Loans provide downside risk mitigation by being senior secured and sitting at the top of the capital structure. They have the first priority on company collateral and repayment in the event of default. This has led to higher recovery rates than subordinated debt, such as high-yield bonds.

    Invesco offers a suite of senior loan strategies focused on US, European or global opportunities. These regional strategies are also available with an enhanced ESG profile.

    • Invesco US Senior Loan strategy

    • Invesco US ESG Senior Loan strategy

    • Invesco European Senior Loan strategy

    • Invesco European ESG Senior Loan strategy

    • Invesco Global Senior Loan strategy

    • Invesco Global ESG Senior Loan strategy

  • Direct lending

    Our direct lending team has decades of experience in sourcing, underwriting and executing senior secured loans in the core middle market. Our capabilities have made us a trusted partner to leading deal sponsors seeking capital, and investors seeking compelling risk-adjusted returns.

    We believe middle market direct lending can offer investors a compelling opportunity to generate significant income, with the potential for lower volatility than traditional fixed income.

    We define the core middle market as companies with between US$100 million and US$750 million in enterprise value, generating annual revenues between US$10 million and US$1 billion. The universe of companies in this segment is highly fragmented and represents a wide range of sectors and industries.

    Middle market senior secured loans offer structural advantages that have the potential to meaningfully mitigate downside risk.

    • Senior position in the capital structure: Middle market senior secured loans sit atop the capital structure and are secured against the assets of the company.

    • Favourable terms: As bespoke arrangements created by a small group of lenders, terms are generally more favourable relative to the upper middle market. Perhaps most importantly, this allows covenants to be included. These give the lender the ability to proactively engage with the borrower, should the circumstances of the company change.

    • Inflation hedge: Middle market loans are floating rate instruments that can help hedge against inflation risk.

    • Attractive spreads: To compensate investors for the market’s illiquidity and inefficiency, the direct lending asset class generally provides a yield premium relative to more liquid debt offerings.

    • Prepayment protection: Middle market loans often provide mechanisms such as call protection to compensate lenders for prepayment, limiting reinvestment risk.

  • Distressed credit & special situations

    Unlike traditional large-cap distressed strategies that are often dependent on market cycles, recessions or sector-specific shocks, we focus on idiosyncratic or company specific opportunities. We use our proprietary sourcing mechanism, rigorous diligence and an active approach to value creation to develop a differentiated, complementary and diversified portfolio. 

    Exceptional distressed credit and special situations managers are not just great stewards of investor capital – they are also strong partners for businesses. At our core, we are problem solvers and value-creators. We aim to help companies transition from challenging periods to ones of growth.

    Across our investments, we target asymmetric return profiles. We seek to generate equity-like returns while assuming credit downside risk. The following themes define our approach:

    • Downside mitigation: We typically enter investments via senior secured debt. This approach allows for risk mitigation.

    • Value creation: We are proactive investors. Prior to investing, we concentrate on identifying the cause of distress and clear catalysts to resolution. We then partner with our portfolio companies and their management teams to effectuate financial and operational restructuring.

    • Inefficient markets: We focus on small-capitalisation companies. The opportunity set in this market is evergreen. Smaller businesses are more prone to idiosyncratic issues, which occur independent of market cycles. Information access to those without a platform, such as ours, is typically opaque, and therefore, these markets are highly inefficient and can present excellent value.

    • Enhanced due diligence: We employ private equity-style diligence in sectors and situations where we have a deep understanding of the business, industry, and path forward to stabilisation and monetisation. The process is augmented with insights and connectivity from our platform’s credit analyst team, which is one of the largest sector-based research teams in the private credit marketplace.

    • Sourcing: Our private credit platform is one of the largest and most active financiers of corporate loans in the world. We use our entirely private-side orientation and extensive institutional connectivity with existing borrowers to maintain a vast radar of opportunities across the market.

Private credit quarterly roundup
Private credit quarterly roundup

Quarterly update Private credit quarterly roundup

As one of the world’s largest and longest-tenured private credit managers, the Invesco Private Credit team shares their views for bank loans, direct lending and distressed credit.

Learn more

Explore the latest private credit insights

  • Alternatives
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    Alternatives

    Alternative opportunities: What’s the outlook for private credit, private equity and real assets?

    By Invesco

    In each new edition, we look at the outlook for private market assets. In particular, we focus on private credit, private equity, real estate, infrastructure and commodities.

    21 March 2024
  • Fixed Income
    Private%20credit:%20A%20case%20for%20senior%20loans
    Fixed Income

    Private credit: A case for senior loans

    By Kevin Petrovcik, Taylor Watts, Derek Fin

    The uncertain US macroeconomic backdrop with inflation pressures, interest rate hikes, and a potential recession was a significant focus throughout 2023. Despite these challenges, we see three compelling reasons to consider investing in senior secured loans now.

    18 March 2024
  • Alternatives
    Private%20credit%202024%20investment%20outlook
    Alternatives

    Private credit quarterly roundup: Yields still hover at record highs and offer attractive relative value

    By Kevin Egan, Ron Kantowitz, Paul Triggiani

    Invesco’s bank loans, direct lending and distressed credit teams to share their views as the first quarter of 2024 wraps up.

    8 March 2024
  • Real estate
    Real%20estate%20pricing:%20Short-term%20view%20needs%20long-term%20perspective
    Real estate

    Real estate pricing: Short-term view needs long-term perspective

    Mike Sobolik, Regional Investment Strategist, North America, shares insights into the dynamic nature of real estate cap rates, including the importance of taking a long-term view when making real estate investment decisions.

    21 February 2024
  • Alternatives
    Alternatives

    The Floating Word – Private Credit podcast

    By Kevin Egan, Michael Craig

    Listen to the Invesco Private Credit team’s new video podcast, in which they discuss topical news, trends, views and opinions on the world of Senior Secured Loans, as well as perspectives on the asset class from inside and outside of invesco.

    18 December 2023

Private credit FAQs

Private credit is an asset class that can generally be defined as non-bank lending. In other words, it includes privately negotiated loans and debt financing. The private credit market typically serves borrowers that are too small to access public debt markets, or that have unique circumstances requiring a private lender.

There is no difference. In general, private credit and private debt are terms that are used interchangeably to refer to private lending – loans that are provided to companies by private investors and private markets rather than by banks or public debt markets.

Default risk is the leading risk in private credit markets. This is because private credit typically involves non-investment-grade borrowers. As such, thorough due diligence and credit expertise is important.

Without a secondary market, illiquidity is another key risk for investors who typically must hold the debt to maturity without having an off-ramp.

Global private credit assets total over $1 trillion, according to various estimates.* Private credit assets have been growing rapidly alongside the steady growth of the private equity industry and as investors seek diversified sources of yield and income.

Senior loans are privately arranged debt instruments comprised of below investment grade borrowers. They are made to large cap companies and syndicated by intermediary commercial and investment banks. These loans are then distributed to multiple institutional investors.

Direct lending means providing capital to companies or businesses without the benefit of an intermediary. In other words, you’re directly lending to a company.

Distressed credit involves investing in the senior debt of companies at significant discounts to par, usually due to perceived fundamental weakness.

Returns are generated by investing in companies where, over the longer-term and through various actions, meaningful upside potential can be unlocked.

Harness the potential of alternatives

Good outcomes call for alternative thinking.

Partner with our real estate and private credit teams to help achieve targeted portfolio outcomes.

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Footnotes

  • *Source: Preqin database as of 31 December 2021 (most recent data available).

Investment risks

  • The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.

    Alternative investment products may involve a higher degree of risk, may engage in leveraging and other speculative investment practices  that may increase the risk of investment loss, can be highly illiquid, may not be required to provide periodic pricing or valuation information to investors, may involve complex tax structures and delays in distributing important tax information, are not subject to the same regulatory requirements as mutual portfolios, often charge higher fees which may offset any trading profits, and in many cases the underlying investments are not transparent and are known only to the investment manager. There is often no secondary market for private equity interests, and none is expected to develop. There may be restrictions on transferring interests in such investments.

Important information

  • Data is provided as at 31 December 2023, sourced from Invesco, unless otherwise stated.

    This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. Views and opinions are based on current market conditions and are subject to change.

    EMEA3557064/2024

Footnotes

  • *Source: Preqin database as of 31 December 2021 (most recent data available).

Investment risks

  • The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.

    Alternative investment products may involve a higher degree of risk, may engage in leveraging and other speculative investment practices  that may increase the risk of investment loss, can be highly illiquid, may not be required to provide periodic pricing or valuation information to investors, may involve complex tax structures and delays in distributing important tax information, are not subject to the same regulatory requirements as mutual portfolios, often charge higher fees which may offset any trading profits, and in many cases the underlying investments are not transparent and are known only to the investment manager. There is often no secondary market for private equity interests, and none is expected to develop. There may be restrictions on transferring interests in such investments.

Important information

  • Data is provided as at 31 December 2023, sourced from Invesco, unless otherwise stated.

    This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. Views and opinions are based on current market conditions and are subject to change.

    EMEA3557064/2024