Private Credit

“Private credit and treasuries and bank deposits, like everything's going to get tokenized. And it, it's just going to mean that financial services is going to have modern, modern rails to run on.”

“So you look at 21, 22, about two to three hundred billion in LBO software transactions happened with over two hundred billion in that taken out. The average valuation for the software deals were 25 to 32 times EBITDA. Those companies today are worth probably h…”

“It's going to be a large space. It's not going to be a couple of trillion dollars. It's going to be tens of trillions of dollars.”

“The fundamental problem isn't lending to software. The fundamental problem isn't doing sponsor backed loans. The fundamental problem Is that in the business of lending, you need a big diversified balance sheet, not only scale or diversification in the sense of…”

“What you'll see is that if you roll for 10 years, 20 years, This industry of private credit will be all about that model of proprietary styles of origination, not that dissimilar to what a bank looks like. You're just doing it with a slightly different capital…”

“It's predicting rain doesn't count. Building the arc does. It goes to this same idea of we can't crystal ball what's going to happen tomorrow. Got no idea where interest rates will go, what could happen, what could come out of left field that we're not thinkin…”

“And that's again, we're in the credit business. We're not in the equity business. We're not compounding returns, and we're not trying to do equity returns through debt. We're trying to deliver fixed income with a premium for trading off a bit of liquidity.”

“We try to avoid having people in a team and developing people that You want to be the star loan picker. In my view, that's for equities. We get compound returns, and you can have the 10 bag or upside. That's not our business. The people that thrive for us are …”

“The macro stress testing, we thought about it a lot at the time of deal inception. How far can things fall in the world or the bad things happen before our capital is going to face an issue? Has the underlying business collateral or asset changed so that that …”

“In other parts of Asia, that dynamic doesn't exist. We're often looking, the ambit of what banks can do in that market is wide, and whenever you're trying to compete with someone with such a low cost of capital, you just have to step up the risk curve.”

“This is a long-term investment asset class. This is not liquid credit. The way people should be thinking about private credit is, think about my portfolio. Let's use sixty-forty. The part that's 60 is for growth. Then there's the part that's 40, the defensive.…”

“If you think about a continuum of public securities and private equity, the AI will not do Private equity. Always need people to do deals. I think you will. And then you have the kind of the stuff in between that requires a lot of negotiation and human interac…”

“I saw twenty billion dollars of pipeline companies that were, they were looking at about splitting the cash flows buying for a dollar.”

“Some evergreen structures have what's called this sort of semi-liquid character, so that every quarter, the company that's running this structure will say, hey, if five percent of the total investors redeem, we'll meet that, but if it's more than that, we won'…”

“Well, just, you know, private credit they're in pain from these SaaS loans. And however much they're marked down, they probably need to be marked down more.”

“Private credit, which is in the news today grew from five hundred billion to about two trillion, what it is today.”

“I think and hope that this is going to be a recalibration. People are going to readopt a more prudent underwriting. I think people in the industry will change behaviors. And by the way, in some cases, the market will change their behaviors because you may not …”

“So we see a bit of a bifurcation between the traditional kind of project finance bank capital source, which remains very Cost competitive for a lot of developers. And then some of our newer, smaller developers who are accessing other forms of capital, includin…”

“I think, like, most of the loans are probably fine, and by the way, Not to like you're, I'm sure your listeners understand a capital stack, like the credit, this is senior secured credit, which is the safest place to be in any kind of corporate financial struc…”

“Our portfolio probably looks a little bit different in that there's a lot of things that we've decided to not spend our time on. Because we believed we'd be better spent spending time elsewhere. Things like private credit, China, Latin America, Africa.”

“There will be indiscriminate selling in private credit. There's good reasons why many of those companies will be sold, but there'll be many reasons where it's just liquidity that's driving prices down.”

“One of the issues with private credit is all the returns are predicated at leverage at the fund level. You need fund level leverage to get anyone excited about it. If anyone came out with a unlevered BDC, it would be a yawn, especially after fees.”

“And that, right now, there's no indication of a slowdown in the economy, really. There's a few, you know, there was a bit of a surprise on the employment report, but by and large, the economy's growing, you know, the long-term trend for growth is not even two …”

“The private credit business really can't fall apart before, frankly, the private equity industry falls apart. Meaning, if you think about it, who has taken on the biggest loans from private, from the private credit space? It's oftentimes the private equity pla…”

“There is a whole sort of universe that I'd put in the category of mark to make believe. And the incentive system is such that you want that mark to make believe to go on as long as possible, because if you are The equity owner, you don't want to mark your mark…”

“The private credit business has been the biggest growing business in the world in the last few years. That leaves some opportunities in the credit markets.”

“We were the first folks to come out of the GFC saying, well, we should have private credit business and a private equity business under the same roof.”

“The ultimate performance through the next cycle is going to be more determined based on the quality of the underwriting than was this a private credit fund or a public credit fund?”

“Most of the move to alternatives in the wealth channel has been in private credit.”

“I do not think there's going to be some calamity. The structure that the asset managers are using is just much better than what the banks used to use. You know, borrow short, lend long. So these are very long dated structures, which is great. You can work thro…”

“Where I think there is a challenge is when all this money comes in, the one thing it does for sure is compress spreads. I don't think the people buying in the wealth channel have the right understanding of what returns they should expect. There was a pocket of…”

“To be able to complement that with credit exposures that were less liquid, that had higher credit risk, or a shorter duration through their floating rate characteristics, was a nice offset and balance to what was in the traditional fixed income portfolios, and…”

“If you look at the profile, the investments will often be put into a retirement account where taxes will be less the issue in factoring into the decision making. In other cases, even with A taxable account, the level of yield one can generate is oftentimes eve…”

“The expectations have to be base rates are coming down. Distribution rates and yields will come down in those private credit floating rate vehicles.”

“If you look at the sheer amount of economic activity, US GDP going from 11, 12 trillion of GDP pre-great financial crisis to 30 trillion today. The number of banks and the consolidation in banks and their move away from lending to private companies and middle …”

“In some ways, what I would call the golden era of the market backdrop that started in 1987 when Volcker stepped down, ended in 2021 with the end of zero interest rates. And thus began a cycle of more challenging backdrops for, say, stocks and bonds together in…”

“What we learned over time, it's rare that you find someone who can hit 300 from both sides of the plate. People who are natural lefties or natural righties. So we evolved that terminology of being a switch hitter to having majors and minors.”

“The entire crypto economy contorts itself around the 40 act. All these BDCs contort itself, private credit contorts itself. And why? Well, right now we don't have the regulatory will to just go and have a wholesale rip and replace of what is really old legisla…”

“The money's already leaked into private credit, which is the next big bubble that's building.”

“The money's already leaked into private credit, which is the next big bubble that's building.”

“When I look at what's going on in that market right now, it strikes me as pretty competitive and not really a great place to find attractive risk adjusted returns.”

“There's a big gap between using venture capital and the private credit markets that are more traditional and sort of profit oriented. And there really needs to be an basically infrastructure financing or project financing for growth stage businesses. That's a …”

“We're on the second half of an S-curve in venture, but the beginning of an S-curve in private equity and private credit. And that's driving a lot of the, I think the next two to five years of growth.”

“Triple C's, for instance, default at about a three year, 30% cumulative default rate. So you know, the largest portion of private credit, according to Fitch, is in triple C equivalent.”

“It's hard to see our equity markets growing 10, 15% from here in the near term, given all the vol in the markets, but if you choose to invest in this asset class and you can deploy, you're going to be sitting there generating low double-digit returns, hopefull…”

“We have seen spreads come in, 50, 75 basis points, but the reason you're still seeing so much capital coming into the market is, On a relative basis, it's still an incredibly attractive asset class.”

“So there, it may, there may be something in there that would become a problem one day. I don't think it's systemic. So that two trillion, the mortgage market when the time it blew up was, I'm going to say, nine trillion, and a trillion dollars was lost.”

“The big Ivy League endowments haven't been huge private credit owners. They've done a lot of Growth equity in VC, it's actually pretty tax efficient, and they've done a lot of public equity that's not been high turnover.”

“So you have this massive growth and at the same time consolidation of non-bank private credit. Trillions of dollars being managed by a small number of firms, and in many ways, the growth of those firms is phenomenal, but it's leaving companies behind that need…”

“80% of private credit is dominated by 20% of the players. They are investing out of very large funds. That market continues to consolidate. And the focus of most folks in direct lending and private credit is on opportunities that are larger than fifty million …”

“We're in the middle of this just generational shift in the way everything gets capitalized, and the traditional relationship between investor asset manager, bank asset manager, S&P 500 issuer, and private alternative firm that is deemed to be more, you know, m…”

“Multi-trillion dollar opportunity to take assets out of the banks into private credit and create tons of liquidity to fund all these growth projects with Germany and France and the rest of the Eurozone need to do because they've underspent on lots of infrastru…”

“Typically off balance sheet. It doesn't go against their existing debt quantum, so it's typically off balance sheet, typically longer duration, typically flexibility in some sort of coupon and when it ramps, if it's a project that's ramping, we may give them a…”

“The point is you have this free call option as a lender to own companies if you have to. And if you're lending to good companies and you control your outcomes, where you're a lead investor, you can probably get to better resolutions.”

“The retail investor hasn't been tested yet because most of this has come online. With COVID and coming out of COVID and it's been a pretty easy low vol period of time.”

“Most institutions fill a bucket. They say, I want to invest X amount in private equity or private credit. Individuals don't. They just want to know, What are the absolute returns?”

“If we invest with a private equity manager, we typically go to all the private credit managers and ask how they treat them.”

“As the industry evolved in private credit, which is the main source of the interval funds, we preferred tender offer funds versus interval. We preferred the concept that in some of the worst market drawdowns that a fund manager could or a board could say it's …”

“Credit side, we definitely have. Even over the last three years, we've probably seen about 25 basis points lower on the management fee side, and on the carry, maybe down two and a half to five percent.”

“If you think about the different strategies within private markets, private equity, which has the largest pool of capital within the 15 trillion dollars or so of private markets assets, so it's about five or six trillion dollars of assets. Private credit is gr…”