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Real estate & private markets

Enhance yield and diversification through investment grade private credit

Flexible financing and bespoke lending solutions for investors focused on attractive relative value opportunities with diversification across the investment grade private credit universe.

Our investment approach

Our investment approach combines deep team experience with access to a diverse, high-quality deal pipeline to create customized investment grade private credit solutions. Each investment decision is anchored in rigorous value analysis, with the overall aim of delivering attractive risk-adjusted returns for our clients.

Credit research is at our core: More than 50 years1 of private credit investing through a proven underwriting process across multiple market cycles. Highly experienced team: Our seasoned investment professionals average over two decades of fixed income expertise, with significant experience in private placements. Long-established, broadly diversified origination: Given our highly selective investment approach, we benefit from a widely diversified opportunity set of deal intake from agented bank deals, Principal network, and third-party strategic relationships built over decades.
Multiple trading relationships with secondary private traders: Provides healthy source for secondary investments and liquidity. Customized approach to portfolio construction: We partner with our clients in a collaborative and ongoing process customized to their objectives and constraints. Alignment: Principal’s affiliated clients typically co-invest alongside non-affiliated clients, keeping our interests highly aligned. Sustainability integration: We assess risks and opportunities to fully understand the long-term impacts of sustainability on every investment.

The opportunity for investment grade private credit investors

As a $1 trillion market, investment grade (IG) private credit continues to grow as a segment of the credit market for companies wanting to raise capital without going through public markets. It can provide more customized opportunities versus public bonds for the issuers, and enhanced yield and downside risk mitigation for the investors.

Enhanced yield

Spreads vary widely among transactions however, IG private credit can potentially provide a higher yield than similar rated public corporate bonds—approximately 30-75 bps average premium—due to illiquidity and complexity premiums.

Incremental value and lower potential volatility

Compared to public bonds, IG private credit may offer better value due to better recoveries, amendment and waiver income, and collateral. In addition, covenants help to potentially mitigate downside risk and offer potential economic upside. Negotiating power from covenants bolsters distressed recoveries and drift-related income.

Diversification

IG private credit returns tend to have low correlation with public equities and bonds, helping to diversify traditional portfolios. IG private credit also offers an opportunity to source new names, industries, maturities, geographies, and structures.

Our investment philosophy is built on three tenants

Diversified deal access

Maximize opportunity set across private debt opportunities, including:

  • Private infrastructure
  • Traditional private placement issuers
  • CTLs and Ground leases
  • Alt. Asset Managers
  • Domestic REITs
  • 40 Act Funds/BDCs/Financials
  • Private ABS/ABF

Fundamental credit analysis

Formalized vetting that includes:

  • Fundamental research
  • Structural and legal analysis
  • Relative value analysis
  • Sustainability and legal assessments based on long term sector expertise and an established, successful 50-year track record

Customized client solutions

Selection of deals that seeks to:

  • Optimize portfolio fit
  • Meet client objectives
  • Offer appropriate risk adjusted value
  • No allocation queues
  • All clients participate in all deals appropriate for their portfolio

Investment criteria

  • Company size: Companies with annual revenue of >$500mm. Typically $1-$5 billion market capitalization.
  • Credit rating: Investment grade credit rating
  • Structures: Typically secured, senior unsecured, or guaranteed
  • Tenors: Can be 3-30 years, with emphasis on 7-15 years
  • Industries: Lending to most sectors
  • Geography: Global, including U.S. and non-U.S. currency

Get to know our investment team

Our team is comprised of seasoned lending professionals, many of whom have worked together for more than 20 years. We have extensive experience across originations, underwriting, and portfolio management, with significant credit investing experience across all major industries and through multiple credit cycles.

Principal Investment Grade Private Credit - Senior leaders

Managing Director, Head of IG Private Credit
Michael Zorich, CFA
29 years of experience
Senior Managing Director, Portfolio Manager
Rob Dowil, CFA
28 years of experience
Senior Private Credit Analyst
Matthew Wolden, CFA
26 years of experience

Featured insights

1 Experience includes investment management activities of predecessor firms beginning with the investment department of Principal Life Insurance Company.

Disclosure

Past performance does not guarantee future results.

Asset allocation and diversification do not ensure a profit or protect against a loss.

Private credit involves an investment in non-publicly traded securities which are subject to illiquidity risk. Portfolios that invest in private credit may be leveraged and may engage in speculative investment practices that increase the risk of investment loss.

ESG integration is considered across all actively managed asset classes, with the approach determined by each investment group’s process. This information is specific to the strategies managed by the individuals providing this content and various investment teams across Principal may have differing views of this approach.

Fixed‐income investment options are subject to interest rate risk, and their value will decline as interest rates rise.

Principal Alternative Credit is an investment team within Principal Global Investors.