Insights

The New Kings of Wall Street Aren’t Banks. Private Funds Fuel Corporate America. (Wall Street Journal)

Private credit funds are taking over the corporate lending market, with assets under management rising to $1.5 trillion in 2022 from $726 billion in 2018. This shift is being driven by a number of factors, including high-interest rates, which are making it more difficult for companies to borrow from banks.

These private credit funds are able to offer large loans, and they are not required to get credit ratings from borrowers. They also guarantee completion of loans, even if market conditions change. However, private credit loans typically have tougher covenants than bank loans, and they charge higher interest rates.

Some analysts are concerned about the growing role of private credit funds in the corporate lending market, arguing that it could concentrate risk in the hands of a few large asset managers. However, others believe that private credit funds can provide a valuable source of capital for companies and offer investors better returns than bank loans.

CLO Weekly 

CLO’s bouncing back?
Overall, the US CLO market shows signs of activity and potential growth. Recent activity includes Napier Park issuing its first CLO since May 2022. Middle market CLOs have been strong, nearing 2022’s full-year total. Several other CLO deals were priced by various institutions, including HPS Investment Partners, Napier Park, Goldman Sachs, and others.

Private Debt Outlook 2023 (Pitchbook)

Despite the uncertainty around market conditions, institutional investors will still find private debt attractive in 2023. The asset class offers options that fit various risk appetites while providing diversification. For example, Direct Lending to the middle market requires strict underwriting and deal terms. This strategy tends to yield better returns during a downturn vs. the large-cap market. For those firms that offer opportunistic credit strategies, investors will find the flexibility to pivot from making loans to trading stressed/distressed debt in secondary market appealing.

Whether investors are concerned with inflation protection, higher interest rates, or slower economic growth (or all of the above), investing in private debt offers several solutions.

(Bloomberg) Credit Suisse Spinoff Asks If World Needs a New Investment Bank

CS First Boston is spinning-out of Credit Suisse as a major piece of CS’s restructuring. Bloomberg rolls the tape on First Boston’s history pre- and post-acquisition – including its famous dealmakers and infamous moments – and asks if a mid-sized investment bank is prepared to thrive in a competitive marketplace.

(Bloomberg) The Supreme Court will make it harder to hire a diverse team

“Two cases pending before the justices involve affirmative action at universities, but there are clear implications for companies.”

Stay tuned for our comments on SCOTUS’ decision.

(Institutional Investor)
As investors rethink their private equity allocations, the PE secondaries market has benefited – reaching a new record of $57 billion through H1. As long as concerns about inflation, rising rates, the war in the Ukraine and impact of Covid remain, the Secondaries market will offer diversification, liquidity and should continue to thrive.