Beyond the “Usual” BTP: How Private Debt Investments and Real Assets Deliver Double-Digit Returns
- Andrea Battista
- 7 days ago
- 4 min read
Over the next few years, European governments will need to raise hundreds of billions in new sovereign debt. Estimates for 2026 alone point to issuance volumes approaching €500 billion across the EU.Despite these figures, demand from institutional investors remains exceptionally strong.
The result is a familiar but often overlooked dynamic: the more a government bond is perceived as safe, the more its yield compresses.
Italy is a clear example. The BTP has gradually regained its status as a core sovereign asset within European portfolios. Increased demand, however, translates into declining yields and a risk profile that is increasingly asymmetric: limited upside, full exposure to duration and sovereign risk.
Against this backdrop, capital does not disappear.It adapts.
Rather than abandoning sovereign-related exposure, institutional investors increasingly seek alternative structures that preserve a comparable credit foundation while improving return efficiency. This is where private debt investments come into play.
Crucially, the distinction is not one of credit quality, but of structure. While BTPs represent a direct exposure to the Italian sovereign, private debt investments in public sector receivables and asset-backed credits provide an indirect but comparable sovereign-related exposure, enhanced by contractual protections and structural inefficiencies that translate into higher returns.
This is not financial alchemy.It is legal efficiency, structural design, and access to a parallel market long reserved for professional investors.
1. The “Hidden BTP”: Private Debt Investments in Public Sector Receivables
Imagine deploying capital with exposure to the Italian public sector and earning not 3.5%, but an annual return closer to 8.5%.At first glance, this appears counterintuitive at comparable credit risk. In practice, it reflects the established market for commercial receivables owed by public entities—particularly Italian regional healthcare authorities.
These receivables arise from the provision of essential goods and services. The ultimate debtor remains the State or a regional authority, but payment timelines are often extended. Suppliers frequently monetize these credits early to manage liquidity needs.
Specialized investors step in by acquiring such receivables, structuring transactions through private placement debt mechanisms within the broader private debt market.
The GuaranteeExceptionally strong. The final debtor is the Italian public sector, resulting in a sovereign-related credit exposure comparable, in substance, to that of a BTP.
The ReturnThe yield premium does not compensate for default risk. It compensates for administrative complexity, illiquidity, and time. Investors with the appropriate legal, operational, and structuring capabilities are able to transform bureaucratic inefficiencies into yield—one of the most established applications of private debt investing.
2. Real Estate NPLs: When Bricks Become Private Debt Investments
If public sector receivables represent an evolution of fixed income, non-performing real estate loans (NPLs) represent the evolution of traditional property investing within the framework of private real estate debt.
In this model, the investor does not acquire the property itself, but the credit secured by that property—often at a significant discount to the underlying market value. This approach is typical of private debt funds and private equity debt financing strategies.
Rather than relying on price appreciation alone, value is created through structure, collateral, and recovery dynamics.
Today’s more sophisticated platforms allow for two distinct approaches:
The Stability Path (Fixed Return)Solutions offering annual yields around 9%, supported by tangible real estate collateral that provides downside protection.
The Performance Path (Variable Participation)By participating directly in the recovery, restructuring, or repositioning of the underlying asset, historical returns may reach 20%–25% over a 24-month horizon. These transactions typically fall within opportunistic or distressed debt strategies, where risk is mitigated by entry price and collateral coverage.
Conclusion: Redefining Diversification
Government bonds will continue to play a role in diversified portfolios. However, in an environment of rising issuance and compressed yields, relying exclusively on traditional sovereign instruments means accepting lower returns without materially reducing underlying risk.
Structured private debt investments offer an alternative path. They allow investors to maintain exposure to sovereign-related or asset-backed credit, while benefiting from structural inefficiencies, contractual protections, and active management.
In this sense, private debt is not a departure from prudence, but its evolution—particularly for investors seeking to preserve capital against inflation while generating sustainable, real returns.
FAQ – Private Debt Essentials
Q: What is private debt?
A: Private debt refers to non-publicly traded financing structures in which capital is provided directly to borrowers outside traditional bond markets, typically by institutional investors or specialized vehicles.
Q: What is a private debt investment?
A: A private debt investment involves acquiring a structured credit exposure—toward public entities, corporations, or asset-backed transactions—with a contractually defined risk-return profile.
Q: What is a private debt fund?
A: A private debt fund is an investment vehicle that pools capital to deploy it across private debt strategies, including private real estate debt and private placement transactions.
Explore Further
For investors interested in how private debt investments can be structured through bond-like instruments, CGPH Banque d’Affaires provides an in-depth overview of its private bond solutions, designed to connect institutional capital with real assets and public-sector-backed credit opportunities.
This content is provided for informational purposes only and does not constitute investment advice, an offer, or a solicitation to invest. Any references to returns are illustrative and not indicative of future performance. Capital is at risk.
