Description
About the Course
The Private Debt Microcredential Program dives into the world of private debt strategies, one of the fastest growing alternative investment strategies over the past decade.
Course Structure
The Private Debt Microcredential Program is broken into four modules, totaling five hours of content.
Module 1: The Fundamentals of Private Debt
The first module, The Fundamentals of Private Debt, is all about context setting. We will make sure you are comfortable with basic concepts like liquidity, credit spreads, and capital structure – all of which play important roles in each private debt strategy. From there, we’ll spend most of Module 1 categorizing the private debt universe and introducing each strategy at a high level. By the end of the module, you should walk away with a better understanding of how private debt works, some common characteristics of the asset class, and how and when it might be most appropriate for a client.
This module is comprised of seven sections:
1. The History of Private Debt
2. An Overview of Capital Structure
3. Liquidity, Interest Rates, and Credit Risk
4. Categorizing Private Debt
5. Private Corporate Lending
6. Asset-Based Lending and Structured Credit
7. Expectations for Private Debt Strategies
Module 2: Private Corporate Lending Strategies
The second module, Private Corporate Lending Strategies, focuses on private corporate lending, the largest category of private debt strategies. Combined, these strategies account for over $1 trillion in assets under management as of 2022. You will learn all about private corporate lending strategies, including its four major sub-strategies: secured direct lending, mezzanine financing, venture debt, and distressed debt. By the end of the module, you should walk away with a better understanding of the four sub-strategies and how and when they might work best in a client’s portfolio.
This module is comprised of six sections:
1. Trends in Private Corporate Lending
2. Secured Direct Lending
3. Mezzanine Financing
4. Venture Debt
5. Distressed Debt
6. Risk and Return
Module 3: Asset-Based Lending Strategies
The third module, Asset-Based Lending Strategies, focuses on asset-based lending strategies. We will walk through real assets debt, which includes real estate, infrastructure, and farmland, as well as balance sheet lending and specialty finance strategies. Asset-based lending encompasses a broad range of sub-strategies, so we have done our best to capture some of the more common ones.
This module is comprised of seven sections:
1. Asset-Based Lending versus Cash Flow-Based Lending
2. Real Estate Debt
3. Infrastructure Debt
4. Farmland Debt
5. Balance Sheet Lending
6. Specialty Finance
7. Risk and Return
Module 4: Private Debt Portfolio Implementation
The fourth module, Private Debt Portfolio Implementation, is the final module in the program. This module will cover three important topics: fund structures, performance measurement, and asset allocation. You will learn the different approaches to implementing private debt into a diversified portfolio. Managing a portfolio is a bit of art and science. You know your clients’ goals and objectives better than anyone, but the lessons here are meant to provide you with frameworks to approach implementation.
This module is comprised of three sections:
1. Fund Structures
2. Performance Measurement
3. Asset Allocation
Learning Objectives
Overall Course Learning Objectives
• Understand the characteristics of and differences amongst the major private debt strategies in the market today.
• Articulate the risk and performance drivers of private debt at the asset class and strategy level.
• And you will be better informed in terms of implementing a private debt allocation within your client’s portfolios.
Module 1 The Fundamentals of Private Debt Learning Objectives
1. Understand the historical context of private debt and articulate the reasons for its rise in assets and adoption since the global financial crisis.
2. Describe the components and importance of a corporation’s capital structure.
3. Differentiate fixed interest rate debt and floating interest rates and describe how they are relevant to private debt issues.
4. Understand the components and importance of credit spreads, and how they relate to credit and default risk.
5. Differentiate the major categories of private debt and their respective sub-categories and explain the appropriateness of these categories in client portfolios.
6. Describe the risk and return characteristics of the three categories of private debt strategies relative to other asset classes.
Module 2 Private Corporate Lending Strategies Learning Objectives
1. The history and rationale for private corporate lending’s growth and adoption.
2. Cash flow-based lending and how it relates to private corporate lending.
3. The common characteristics of senior secured direct lending and its appropriateness for a
client’s portfolio.
4. The common characteristics of mezzanine debt and its appropriateness for a client’s portfolio.
5. The common characteristics of venture debt and its appropriateness for a client’s portfolio.
6. The common characteristics of distressed debt and its appropriateness for a client’s portfolio
7. How the four primary private corporate lending strategies relate to each other in terms of return expectations, credit risk, and capital structure placement.
Module 3 Asset-Based Lending Strategies Learning Objectives
1. Asset-based lending and how it differs from cash flow-based lending.
2. Cash flow-based lending and how it relates to private corporate lending.
3. The common characteristics of real estate debt and its appropriateness for a client’s portfolio.
4. The common characteristics of infrastructure debt and its appropriateness for a client’s
portfolio.
5. The common characteristics of farmland debt and its appropriateness for a client’s portfolio.
6. The common characteristics of balance sheet lending strategies and their appropriateness for a
client’s portfolio.
7. The common characteristics of specialty finance strategies and their appropriateness for a
client’s portfolio.
8. How the four primary private corporate lending strategies relate to each other in terms of return expectations, credit risk, and capital structure placement.
Module 4 Portfolio Implementation Learning Objectives
1. Describe and differentiate the common fund structures used by private debt managers, including drawdown funds, secondary funds, evergreen funds, interval funds, and BDCs.
2. Understand the appropriateness of different fund structures depending on client objectives and constraints.
3. Understand the three primary private investment performance metrics, including IRR, MOIC, and PME.
4. Understand the typical fee structures of and how fees are charged by private debt funds.
5. Describe the challenges with traditional asset allocation models in terms of allocating to private debt strategies.
6. Understand the role sub-strategy diversification plays when building out a private debt allocation.
7. Understand the applications of vintage year diversification and cash flow management when making allocations to private debt strategies.