Opinion
Acito: Systematic credit allocation should replace traditional fixed income
“We would argue it should be a systematic part of the portfolio. And I think really that is because it arguably is, is and could be taking the place Of what that fixed income component always had.”
Insight
Acito: CLO equity has tighter 5-year return dispersion than public equities
“If I get CLO equity right, and my manager's a good job with the credit, I can't predict the path, but over a five-year return, here's how much I feel comfortable with it, and equities, the dispersion of potential outcomes is much broader than that. Maybe there…”
Prediction Not checkable as stated
Acito: Investors waiting for another 2008-style crisis will not deploy capital
“And thankfully that's not going to be the next cycle. And I think for people who are going to wait for the apocalypse, apocalypse two to happen, I just, they're not going to get money to work. It's not going to be there, and they're going to be looking for som…”
Assertion Not checkable as stated
Acito: Institutional allocators largely excluded credit strategies before 2008
“It wasn't part of the traditional fund of hedge funds toolkit. It certainly wasn't part of an average institution's asset allocation. It was bits and pieces, some distressed credit, corporate credit, yes, but a few mortgage funds here and there. It was nothing…”
Assertion Supported
Acito: Institutional allocators rarely had dedicated credit allocations before 2015
“Up until the last two years, I would have a very difficult time finding an institutional investor who had a dedicated credit component to their own.”
Opinion
Acito: Allocators face an existential crisis over investment-grade fixed income
“I think allocators of the world out there right now are really going through an existential crisis as to what to do about investment grade.”
Assertion Supported
Acito: Investors must take below-investment-grade risk to get 5% yields today
“I think with, to get that same five or five and a half percent today, you have to be taking below investment grade exposure.”
Assertion Supported
Acito: Retail capital in credit markets is at an all-time high
“We've never had as much individual retail, so to speak, money in the credit markets as we do now.”
Prediction Not checkable as stated
Acito: Institutions will shift from one-off credit funds to broad multi-strategy mandates
“And I see that as a big part of the future growth, and I think institutional investors will no longer view some of these emerging firms as, oh, they have an interesting distressed fund or RMBS fund. They'll say, we have a bunch of credit investing partners, an…”
Assertion Not checkable as stated
Acito: Credit lacks a unified cross-asset risk modeling system
“I mean, there's, unfortunately, there's no great singular risk system right now, a part of, unless you're staying in a very segregated part of the market.”
Assertion Not checkable as stated
Acito: Institutional investment committees are dominated by equity specialists
“Because if you go to your typical investment committee, there are 10 guys and gals who know equities. They're private equity people. They're hedge fund managers. They're long only managers. You rarely get to the committee where of the 10 people, six are credit…”
Insight
Acito: Direct lending due diligence resembles evaluating a bank, not hedge funds
“Credit investing is very different in that it. Looks more like a bank. It's particularly when you get into the new origination elements of investing or maybe prop trading to some extent, but just take on the direct lending side. When you walk in to evaluate a …”
Assertion Supported
Acito: Early private credit funds are missing their 4-5 year wrap targets
“How long are these funds going to be around? I think people at the beginning were very optimistic. They'd be wrapped up within four to five years. They're not wrapped up within four to five years.”
Prediction Not checkable as stated
Acito: The next credit distress cycle could be an "Amazon distress cycle"
“Maybe, maybe the next distress cycle is called the Amazon distress cycle. Again, where you have severe displacement of certain industries happening during a period of time in which the broader economy is doing fine”
Assertion Supported
Acito: High-grade bond portfolios cannot achieve institutional actuarial target returns
“At the end of the day, you cannot recreate
A triple A, double A portfolio that's nearly going to get you to your actuary returns.”
Assertion Supported
Acito: Pre-crisis $3 billion credit firms have grown into $30 billion platforms
“Prior to crisis would have been a terrific business at three and four billion dollars. Now they're 30 and forty billion dollar businesses.”
Insight
Acito: Public pension disclosures reveal how allocators shift asset allocations
“One thing I did, I have found very helpful recently is spending a bit more time looking at what some of the public pensions put on their websites because of, let alone Freedom of Information Act, but more, a lot of them are just, here's what we post. I think i…”
