Recently, Azalea Group has just released its Astrea IV Class A-1 bonds. It was widely marketed as the debt instrument which provides access to private equity investments. This was definitely confusing (at least for me) and here are the reasons.
Bonds and equities have different long-term investing objectives
Bonds are predominantly debt instruments while equity, regardless private or public, are stake holdings in companies. Debt is primarily raised externally with the purpose of investing in the company’s operations for higher future returns. Interest and loan repayment is required. Debt is classed higher than equity for repayment in the event of a default. While the risk of failure of loan repayment can be mitigated by securing the loan with collaterals (where the collateral can be sold in the event of default), the investment returns are still from the interest payments. Hence, simple judgement of attractiveness of a bond is based on ......