Kateryna Onyshchuk
By Lori Cuneo
With private placement markets having finished another strong year in 2022, we review key themes and offer our outlook for 2023.
The private placement market had a productive 2022, with close to $100 billion in volume across several hundred issuers from a global universe, according to Private Placement Monitor.
The market opened 2023 in strong fashion with a flurry of activity in just the first two weeks. We believe the more stable rate and spread environment relative to 2022 will likely support opportunistic issuance and bring back some of the issuers that stayed on the sidelines during the market volatility of 2022. We are already seeing this in the global infrastructure space, where financings that were put on hold in 2022 are now revisiting the private placement market. Infrastructure remains a highly sought-after area on the buy side, and the lack of issuance last year has generated pent-up demand.1
We also anticipate activity from sectors including sports and a variety of unique corporates and structured credits out of Europe, the U.K., Australia, Canada and the U.S. The asset-backed securities market remains active, and structured transactions have provided a steady stream of supply with what we consider attractive relative value.2
More anticipated financial-related issuance from alternative asset managers and business development companies (BDCs) could test the market’s fatigue with this space, particularly for BDCs as we monitor the economic landscape going forward. We also expect the real estate sector to remain an active issuer in 2023. In our view, access to differentiated deal flow is critical in diversifying away from these more frequent issuance sectors and focusing on the most appropriate relative value.
Environmental, social and governance-related issuance should remain topical for both issuers and investors. The Neuberger Berman team is proud of the firm’s leadership in this area, particularly relative to peers who have a less established history with ESG.
We expect 2023 to be active and diverse from a supply standpoint, with investor demand continuing to outstrip supply. In our view, the growth in asset allocations toward this market, coupled with new buy-side entrants looking to gain scale and capture the higher returns, covenant protection and diversification that this market affords, has led to a highly competitive backdrop for allocations.
1,2Source: Private Placement Monitor.
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