Updated to reflect 2024 RETURNS
Private debt continues to rapidly expand as a segment in capital markets for both investors and capital seekers. The segment’s burgeoning record since the financial crisis in 2008 has shown growth near 10x while a Morgan Stanley report identifies growth in the last four years from $1 trillion to $1.5 trillion, and further suggests the segment to hit $2.8 trillion by 2028. Private debt saw further diversification across new asset classes due to economic and regulatory pressures on traditional debt sources. This trend continues to attract a wider range of investors and debt seekers away from traditional opportunities and is expected to continue into 2025 with the potential of $5 trillion to $6 trillion of traditional funding shifting to nonbank capital providers.
Harvest Returns offers private credit investments from loans to production agriculture and related businesses across the country. They are collateralized with real assets, including land, farm equipment, and livestock inventories. Farmers and agribusinesses come to us because of the flexible offering terms and streamlined capital raise process that we provide compared to traditional ag lenders. From 2019 through 2024, the average net annual return of our private credit offerings was 9.8%.* Private credit investments can carry a higher risk premium due to their illiquidity and the fact that they are not publicly traded.
Farmers, ranchers, and agribusiness owners are facing one of the most constrained credit markets in decades. The producers and small business owners we speak with are constantly in search of flexible loan sources to fund business expansion or working lines of credit. Over 40% of respondents to a recent ag lending survey by Farmer Mac reported tightening underwriting standards (48%) and loan terms (42%) in 2023 (up from 30% and 22%, respectively, in 2022).
Past performance is not an indicator of future returns.
Aside from the potential of out-sized returns in a challenging market environment, private credit offers a number of benefits to investors:
Steady income: Private credit investments can be attractive to investors who are seeking to generate passive income from their investments. Harvest Returns debt investments have varying payment frequencies, ranging from quarterly to annually.
Low correlation to public markets: Private credit investments often have a low correlation to publicly-traded stocks and the corporate bond market, which can help to balance out a portfolio and reduce volatility. The KKR study suggests that investors move out of a traditional 60/40 stock/bond allocation, and advises that investors might consider shifting up to 10% of their portfolio into private credit over several quarters.
Relationship-based lending: Harvest Returns maintains an ongoing relationship with all of its agriculture operators. Investing in our private lending opportunities provides support to American farmers and ranchers and creates steady jobs in rural areas, while strengthening agricultural supply chains.
Diversification: Private credit investments can provide investors with exposure to a diverse range of industries and companies that may not be available through public markets. In Harvest Returns’ case, our investments focus on agriculture, which is an industry isolated from mainstream investment sectors. Geographic diversification helps reduce portfolio risk and increases returns.
Harvest Returns launched its first private credit fund in 2023, which has been paying a steady stream of income to investors each quarter.
Our second private credit fund is now open to accredited investors for a $25,000 and up investment minimum.
*The net annual return is calculated using the time-weighted balance of all outstanding loans in each calendar year. Past performance is not indicative of future results and there can be no assurance that the future performance of any specific investment, investment strategy, or product will be profitable. Please read all offering documents carefully prior to investing.