Insight
deVeer: Lead private credit lenders hold a free call option on companies
“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.”
Insight
DeVeer: Pro-Cyclical Retail Credit Capital Inherently Risks Underwriting Discipline
“I would not want 75% of my credit capital to be in a pro-cyclical structure like this, which it inherently is, and that's where you can lose discipline.”
Opinion
Private Credit Gets Easier to Execute as Firms Grow Larger
“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.”
Insight
Lenders Cannot Effectively Price Bad Credit Due to Asymmetric Downside Risk
“You can't price bad credit. You can try, but you probably won't be right. The thing that's tricky about credit is has a totally asymmetric risk profile. You get paid fees and you get paid a coupon and hopefully you get paid back. If you're wrong, you lose all …”
Assertion Not checkable as stated
Lenders See No Pricing Delta Between $50M and $250M EBITDA Borrowers
“We actually don't see any delta in pricing or terms for the most part between a fifty million EBITDA company and a two hundred and fifty million dollar EBITDA company. Leverage levels are about the same. Pricing's about the same.”
Insight
Sustained 12% Senior Debt Rates Would Cause an Economic Depression
“You can't finance the US economy with senior debt at 12%. You'll create a depression.”
Prediction Not checkable as stated
New Liquidity Gives Capital Providers Power to Dictate Restructuring Terms
“And the only thing that's going to solve the lack of cashflow servicing a lot of debt is new liquidity. And if you have liquidity and you can drive terms on Outcomes. I think you're going to be pretty impactful. And if you don't have liquidity, I don't think y…”
Insight
Relying on 40% Loan-to-Value Metrics for Credit Safety Is Dangerous
“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 …”
Assertion Partly supported
DeVeer: Blackstone Held 60% Share in Private Wealth Alternatives Around 2021
“When we were in the midst of negotiating the acquisition, we saw it as an asset that we could unlock, but it was really interesting period of time in 2002 1001, whenever it was, Blackstone, because of their early lead in the market, had a roughly 60, 65% marke…”
Assertion Supported
deVeer: Ares 20-year charge-offs beat public market default rates
“If you look at our historical charge-offs versus defaults in the public markets, they're just better over a twenty-year period because of that control”
Insight
Kipp deVeer: Redemption Gates in Semi-Liquid Funds Protect Investors
“The way these structures are set up are actually set up to protect investors because the alternative is a fire sale of assets at bad prices, which creates bad outcomes for the investor.”
Insight
DeVeer: Retail Inflows Push Competitors to Loosen Underwriting Discipline
“If they have a big flow quarter in a particular product, we'll see them be very competitive on new underwritings because they have a bunch of cash sitting around that they need to deploy.”
Insight
Private Markets Take Share From Public Markets During Economic Downturns
“The privates market overall consolidates share away from the public markets during downturns.”
Prediction Not checkable as stated
Higher Interest Rates Will Spark a Shining Moment for Secondaries
“Our view is there's a lot of this private capital that's now stuck. With higher rates that really is going to create liquidity issues for a lot of investors. So this could really be a shining moment for the secondaries business.”
Assertion Supported
Ares Default Charge-Off Ratio Is Under 5 to 10 Basis Points
“So of course we have a cumulative default charge off ratio, which is very, very low, like under five and 10 basis points for both senior and junior assets.”
Opinion
The US Has Too Many Banks and Smaller Institutions Face Trouble
“The reality is we have too many banks in the US, right? And we shouldn't have 4600 banks. So I wouldn't be surprised if there's a little more noise from some of these smaller banks.”
Prediction Not checkable as stated
Domestic Nationalism Will Keep European Banks Active in Corporate Lending
“The banks won't quite exit the market completely. Because, you know, there's still some French banks, and they're nationalistic about lending in France, and there are German banks that want to lend in Germany, and Swedish banks that want to lend in Sweden, so …”
Insight
Modern High-Yield Restructurings Are Driven by New Capital, Not Covenants
“The covenants are nice to have. They allow you to reprice risk along the way. We still have them in most of our middle market deals, but the big quality companies, syndicated loan market, et cetera, the high yield market, they don't have covenants. So the rest…”
Assertion Not checkable as stated
DeVeer: Five Alternative Managers Hold 40% Share in Private Wealth Channel
“There are now four or five firms, including Blackstone and Aries, that have probably 30 or 40% market share at the top of the stack.”
Insight
DeVeer: Financial advisors favor semi-liquid funds over volatile public BDCs
“I had this debate for years with financial advisors where I'd say, just buy the BDC. Well, my clients don't like it when the stock goes up and down and they don't like the correlation to the market and the volatility. And so we'll do what we do. And stock goes…”
Prediction Held up
DeVeer: Ares Expects 20% of New Capital From Wealth, Trailing Peers
“Most firms like Aries expect that 40% of their capital raising going forward will come from the wealth channel. That's not our expectation, but I mean, I think if we think about sizing new capital on an annual basis, my guess is something like 20% of our forec…”
Assertion Not checkable as stated
DeVeer: Most Financial Advisors Prefer Allocating Across Three to Five Managers
“Most of the FAs we talk to will say, I want three to five managers That have a pretty well curated set of products.”
Opinion
Kipp deVeer: Semi-Liquid Funds in Concentrated Private Equity Are Risky
“I'd be concerned looking at a fund that was, quote, semi-liquid in a concentrated pool of private equity assets because there's no easy way to create capital to the extent you need it.”
Assertion Supported
DeVeer: Retail Alternative Fund Fees Are Identical Across Major Managers
“If you were to launch a non-traded BDC today, you'd say, who are the biggest non-traded BDCs? What are their fees? Boom, by the way, they're all exactly the same, and they haven't moved much. That's true of the other asset classes as well, so everybody's a car…”
