private credit

“So we're not very high on credit right now. And, you know, fixed income-wise in general, we're pretty conservative. We are finding interesting things in private credit, and that's where we would prefer to go. Rather than taking a higher risk in public markets,…”

“We can borrow against our public equities at Fed funds plus 20 basis points, lever up this safe but esoteric private credit, and it works really well.”

“Invariably in a moment in time when something goes wrong in a credit deal, if you're trying to solve for 20 utility curves, forget it. It's going to be lowest common denominator, versus when we do deals, it's only us or us and one or two trusted partners, so t…”

“Obviously with spreads blowing out the way they have opportunities in private credit, distressed, high yield are interesting. And there's enough stress that looks like it's been created in that market to make it attractive for liquidity providers. Wouldn't say…”

“Credit isn't about being a genius investor that has epiphanies all the time. It's really about finding borrowers that need help, finding borrowers that have very high cost of money, and then finding ways to create a loan that's going to give you a very nice re…”

“When you start thinking about these hybrid asset classes that have a little equity beta, a little bond beta, it can really cause some challenges to your asset allocation process. Like, where would private credit or high yield sit? Do you break it and say it's …”

“We've got about two and a half billion in private credit and infrastructure and those neighboring activities, those activities that overlap on the margin with private equity. Are also actively managed internally.”

“The private equity business model and private credit and private real estate fit in the same bucket. But you have locked up capital. That's going to pay a contractually obligated management fee, regardless of what transpires with that business, which provides …”

“On the investing side, again, one of the big changes in the industry over the years is everyone always used to do one thing, like you did private equity or you did private credit. Now you do everything and we do everything.”

“The illiquid part of portfolios is now an established part of how you invest. If you're not in it in some way, you're not really having a balanced portfolio that's going to perform.”

“It will never be perfect in these markets. Whether they are technically public or technically private doesn't seem to matter that much.”

“And then of course, just general volatility, the predictable income from private credit and low volatility in that market has collected a lot of dollars. When the markets are unstable, and there's something very attractive about that private credit market. Any…”

“One thing that sponsors love about the private credit space is that there's certainty. They're not syndicated. It's not one of the big banks looking to syndicate out the loan. They buy the deal. The private credit providers, they're the ones that are going to …”

“The movement away from traditional sources of credit Is only going to continue. Banks are getting out of that business, and what's happened in the U.S. With Silicon Valley and Signature, I mean, there's just going to be more need for private credit. The amount…”

“I would argue it's a sign of a very healthy market and a growing market when you have more dry powder coming in, and that's what's happened in private equity, private credit, all those different illiquid markets.”

“We have had more equity in companies than we've had in prior cycles. So if we think about the risk to the credit compared to what it was in The risk going forward of deals that have been done is more on the equity, I believe, than on the credit. The credit is …”

“10 years ago, 80% of everything we did was public. We'd buy public bonds. Today, 80 to 90% of what we do is private. So it's all bilateral.”

“What you're finding is the larger firms, whether it's Aries, Oaktree, will go out and end up doing these bilateral deals, and they'll end up using the leverage from a bank To generate the return. So I think, I would tell you, 10 years ago, people didn't really…”

“We're looking at it. We didn't have a lot of that in the portfolio, and I feel like we're at a point in the cycle where I think it could be making sense.”

“I think some of the categories that will morph private credit's going to change a lot over time, and we're going to have a default cycle in private credit, which will have a impact on distressed investing, They'll have a new round of expertise required.”

“The nature of most Wall Street innovation is it's never stress tested for a rainy day, because that wouldn't be any fun. It's fun to sell a lot of bonds, sell a lot of stocks, sell a lot of partnerships, and rake in the investment banking fees, but when the ra…”

“I think there's too much comfort gained by the, oh, we're only in at 40% LTV. And you're learning that right now in every asset class. Things, even in private markets, can revalue very quickly. So you have to have a lot of conviction around where you are in a …”

“I mean, a senior deal was Three and a half times levered with a six or 700 basis point spread to the risk free rate. Mez deals were 15, 16% fixed rate coupons with seven and a half percent of the company in warrants that struck at zero. He charged five point f…”

“This is one of the few investment businesses, in our opinion, that's actually easier the bigger you get, so long as you continue to invest behind it.”

“And probably, to be honest, we think we're being overpaid for the risk we're taking in the current environment of scarcity as banks are pulling back.”

“If a deal comes in our shop today, a hundred million dollar EBITDA company, there's a very good chance that's going to go private credit, not syndicated.”

“I think it'd be really tough today to be a player in private credit that's a billion or a five billion or even a ten billion dollar player. It's tough to make it work. So you need to be a player of scale.”

“The best opportunities that are being executed today are really in the private credit space. It's providing both senior loans and mezzanine loans to borrowers who can't get their traditional financing done with their banks. And that type of return is clearly a…”

“If we're going to use up what we think of as a sort of illiquidity budget, I'd rather be in an asset that offered the potential for Uncapped returns over time, of course, not all of them are going to achieve an extraordinarily high returns, but I didn't want t…”

“To mention a few others, private credit absolutely punching above its weight. People are really interested in private credit right now. The boom is still here.”

“Many people try to separate this, but to me, there's no difference between private credit, public credit, term loans, etc.”

“What's changed very significantly over the last period since the great financial crisis is the amount of capital that is required to be held per unit of risk on a bank's balance sheet. The formulae are complex and there's many of them, but bottom line is that …”

“In the current market, private credit is probably trading in the nineties.”

“We have some very meaningful holes in the portfolio when you look at us compared to peers, one of which is real estate. We have very little private credit to speak of. We don't have any global emerging markets managers. There are all sorts of things that we do…”

“My strong belief is that we've shifted around a lot of risk into the insurance, particularly the offshore reinsurance world, where leverage ratio is incredibly high, increasingly invested with affiliates. And we all know what that means, but it's, the reason I…”

“Clearly there is a very, very different model for the private equity backed insurers. A lot of insurers are using private credit to be sure, but the private equity backed are using it much more and other products, whether it be CLOs and using a lot of offshore…”

“If we continue and rates stay high here, I don't see how there's not more pain in private credit.”

“Private credit by early twenty-twenty-three, a lot of people were talking about it, but not a lot of people were doing things about it. By early twenty-twenty-four, they had. But you had a full year where you could deploy at 11, 12% First lien in new buyouts, …”

“There were some astounding statistics that I saw from Of something like sixty-five billion dollars in assets got allocated from the four large bulge bracket banks to, say, private equity, private credit, and infrastructure funds. And you could compare that to …”

“We do almost no on the run private credit.”

“And I would say that the aspect of being undiscovered and unloved is over. It's a reasonable thing to do if you do it carefully, but I don't think it's a special strategy. It's just fairly priced.”

“And by the way, the SEC doesn't look at these things, because these are private investments, so they don't require accuracy. And the investors in the fund are mostly happy without accuracy, because as I said, they don't have to report problems to their higher …”

“Private credit and other private assets do not mark to market in the sense of reflecting the swings of psychology. When you go through a tough period and high yield bonds are down 10% and private credits down two percent, I think that's the explanation.”

“The people who run these funds Pretty much like the fact that they don't mark the market, because then in the bad times when the headlines in the papers are so negative, they don't have to go to the treasurer of the organization and say, we're down 10%. They c…”

“If you buy a private credit and you change your mind, you shouldn't be able to expect to sell it. As my partner, Sheldon Stone, who's been with me for 42 years now, he was my first analyst at Citibank. He says there's no eraser on the pencil, which is, I think…”

“Over that same three-year period, against loans and equity markets that are flat to down, the private equity and the private credit managers are nominally up 50%.”

“For private credit, the incremental yield ultimately is roughly similar between a private credit product off-chain and on-chain. There's no real discernible difference between the two today because that perceived risk has migrated towards zero.”

“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…”

“You are starting to see some hedge funds think about private credit, and you are starting to see some hedge funds think about longer lock vehicles. So they're kind of getting into certain aspects of private markets that a larger multi-strategy alternative asse…”

“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 …”

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

“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.”

“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?”

“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.”

“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 …”

“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.”

“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.”

“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.”

“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.”

“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…”

“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…”

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

“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…”

“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…”

“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?”

“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.”

“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.”

“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.”

“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.”

“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…”

“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.”

“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…”

“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 …”

“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.”

“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.…”

“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.”

“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…”

“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 …”