Portfolio Implementation

Direct Lending for the
Tax-Aware Investor

For individual allocators, one challenge of investing in direct lending is the tax inefficiency of the asset class.

This two-part series was developed by the Golub Capital Insights Team to address this topic from several perspectives. Drawing on a 20+ year historical analysis of direct lending and other assets, we explore how tax-sensitive investors may best engage with the asset class.

A Happy Marriage of Munis
and Direct Lending

Default Rates

Opposites Attract
Munis and Direct Lending as Portfolio Complements

This piece shows that municipal bonds and direct lending have complementary attributes that blend well in a total portfolio. By pairing the well-known tax efficiency of munis with direct lending’s high-income potential, low duration and strong historical returns, investors may build more diversified debt portfolios with a stronger risk-return profile and meaningful tax efficiency.

Read the White Paper

Cov-Lite Loans

From Allocation to Location
Positioning Direct Lending in the Tax-Aware Portfolio

This paper argues that traditional theories of asset location (making asset class tax inefficiency the sole criterion) can overlook the potential benefits of tax-deferred compounding. We illustrate how direct lending’s combination of equity-like returns and bond-like taxation makes it particularly well-suited for tax-advantaged accounts like IRAs.

Read the White Paper

Smart Asset Location Enables
Tax-Aware Asset Allocation

Download the Series

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