The Benefits of Investing in Private Debt vs. Public Debt

For investors seeking reliable income and lower volatility, the choice between private and public debt investments will have a significant impact on their portfolios. While both investment types have unique characteristics, private debt is often the smarter choice for accredited investors who value stability, predictable returns, and the opportunity to avoid the rollercoaster ride of public debt markets, especially through funds like LBC Capital Income Fund, LLC Income Fund.

In this article, we’ll explore why private debt investments can provide a more stable and secure alternative to public debt, what distinguishes them, and why they may be the ideal fit for certain investor profiles.

What Is Private Debt vs. Public Debt?

Public debt investments usually refer to instruments such as corporate bonds or securities issued by the government and traded on public markets. These are familiar to many investors because they are accessible, liquid, and widely discussed in financial media.

Private debt, in turn, implies credit extended by private funds or investors to either corporations or individuals. Unlike public bonds, private debt is not traded on an exchange. Instead, it is arranged directly between lenders-like private debt funds-and borrowers.

For example, LBC Capital Income Fund, LLC Income Fund specializes in private real estate-backed loans through trust deed investing. These loans are secured with tangible real estate assets, offering both stability and a steady return.

1. Stability in a Volatile Market

The most painful points for many investors are the volatility of the public markets. Public debt investments, from corporate bonds to government treasuries, are subject to fluctuations due to changes in interest rates, political developments, and broader market sentiment.

Contrariwise, private debt investments are in many ways immune to that trend. The returns come most usually in fixed and well-appointed amounts, therefore investing gets a clear view on its end amount. This makes especially poignant arguments in times when money markets are going in or out of turmoil on unstable waves.

For instance, the trust deed investments offered by LBC Capital Income Fund, LLC offer an annual return of 8-10%. Since these loans are short-term and collateralized with real estate, they provide predictable income regardless of turbulence in the stock or bond markets.

2. Higher Yields Compared to Public Debt

Public debt investments, especially bonds from governments, are almost always lower in yield since investors consider them to be somewhat secure. For example, by mid-2024, the yield on a 10-year U.S. Treasury bond is hovering at roughly 4%, a level that will not pace the rate of inflation. Corporate bonds may give investors a slightly higher rate, but they also have a greater risk.

Private debt investments tend to be higher-yielding, as they usually involve bespoke loans with more advantageous terms for the lender. For example, trust deeds are collateralized by real estate and structured to provide regular income.

Funds like the LBC Capital Income Fund, LLC Income Fund take advantage of this by investing in thoroughly vetted loans, assuring higher returns with security for investors.

3. Diversification Beyond Traditional Markets

Another positive aspect of private debt investment is diversification in one’s portfolio. Most investors heavily depend on publicly traded securities, such as stocks and bonds, which are vulnerable to market fluctuation.

Private debt introduces a completely different asset class to a portfolio-one that is not directly tied to stock market performance or public debt markets. For example, with LBC Capital Income Fund, LLC, your investment is tied to real estate-backed loans, which tend to behave independently of traditional markets. This can act as a buffer, especially during market downturns.

4. Lower Correlation to Interest Rates

Public debt investments are really sensitive to interest rate fluctuations. When the rate is increased, bond prices have usually fallen and thereby reduce the value of an investment in bonds.

Private debt investments, such as the short-term loan solutions offered by LBC Capital Income Fund, LLC, are less influenced by rising interest rates. Short-term loans mature faster, thereby giving the funds an opportunity to better adapt to changing conditions within the market. Further, the investment in trust deed lending is collateralized by tangible assets in real estate, many of which appreciate, offsetting potential risks even more so.

5. Transparency and Control

Public debt markets can be impenetrable to the individual investor. Bonds trade on secondary markets, and their pricing is susceptible to market speculation and other factors out of an investor’s control.

Private debt funds, in contrast, offer a more transparent and controlled experience. Investors know where their money is going and can often see the specific loans they are helping to fund.

Due diligence on every loan in the fund is done by our team at LBC Capital Income Fund, LLC, for instance, to make sure each investment meets strict criteria. This hands-on approach provides peace of mind for investors, knowing that their capital is being carefully managed.

6. The Role of Real Estate in Private Debt

One of the major advantages of private debt investments is the ability to secure loans with real estate. For example, trust deeds are collateralized by physical properties that add an extra layer of security for investors.

Even in the unlikely case of a borrower default, the real estate asset can be sold to recover the loan amount, protecting the investor’s principal. This is a level of tangible collateral that cannot be provided by public debt investments.

With LBC Capital Income Fund, LLC, every trust deed investment is secured by real estate, ensuring that investors have a safety net built into their portfolios.

7. Meeting the Needs of Accredited Investors

Private debt funds like LBC Capital Income Fund, LLC Income Fund cater specifically to accredited investors, offering a tailored experience that aligns with their financial goals. Accredited investors often seek opportunities that deliver consistent income without requiring active management, and private debt fits the bill perfectly.

LBC Capital Income Fund, LLC’s trust deed investment is particularly attractive because it matches higher returns with the solidity of real estate-backed loans. Investors can opt for monthly distributions or reinvestment of dividends, therefore the compounding effect increases an investor’s wealth over time.

How LBC Capital Income Fund, LLC Stands Out

With so many private debt funds on the market, only a few stand out-actually very few-and they offer a combination of critical experience, transparency, and results.

• Experience: With over 14 years in the industry, our team knows how to navigate the complexities of private lending to deliver stable returns.
• Security: Each loan within our portfolio is carefully vetted and real estate-backed, ensuring the highest level of security for our investors.
• Returns: Our investors see annual returns of 8-10% annually, well outpacing many of their public debt alternatives.
  
  In these regards, LBC Capital Income Fund, LLC holds an especially unique value proposition for accredited investors focused on diversified income streams.

Private debt investments make up an interesting alternative to investing in public debt markets today, particularly for an investor like the accredited investor in the case of higher yield desire, stability, and diversification. Similarly, you can benefit from real estate-backed loans that fund, predictability in your returns, and management that’s highly experienced by joining this LBC Capital Income Fund, LLC Income Fund today.

If the volatility and low yields of the public debt markets have become too much to bear, it may be time to take a closer look at private debt investments. At LBC Capital Income Fund, LLC, we are here to help you reach your goals with a proven strategy prioritizing stability and growth.