LPX Group, an alternatives research and index provider, has launched its inaugural Listed Debt ’DLX’ direct lending index, which serves as a standard benchmark for the private debt asset class, to track the performance of companies that provide debt capital to unquoted companies.

The index is based on a representative universe of listed debt companies. As of 31 August 2021 there were 44 companies listed debt firms worldwide – and because the performance benchmark is a stock index based on market prices, this also allows for direct comparison with other indices or benchmarks.

Over the entire observation period, from 2009 to the end of 2020, the DLX direct lending index shows an annualised geometric mean return of 10.46% with a standard deviation of 21.33%. The MSCI Financials returns over the same period was 6.90% with a standard deviation of 18.88%.

Michel Degosciu, co-founder and managing director of LPX, said: “Since the global financial crisis, private debt has become its own asset class for investors, driven by attractive post-global credit opportunities and as a lucrative alternative to the low yields observed within traditional fixed income and credit markets.

“Investors’ access to this market was nigh on impossible previously as it is a notoriously challenging one to track – a niche market without any standard definitions. Our DLX direct lending index overcomes this for investors, broadening investor access on a systematic basis that allows them to benefit from this burgeoning asset class.”

LPX av div yieldPicture 1

This figure shows the average dividend yield (in percentage) of the DLX Direct Lending Index from 31.12.2009 to 29.12.2020. Source: Bloomberg

Degosciu continued: “Empirical results suggest that the integration of private debt into the strategic asset allocation improves the risk and return menu for an investor in stocks and bonds. Listed private debt promises to be a particularly attractive asset class for investors who wish to focus on a steady dividend payment in their asset allocation.” 

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