Displaying items by tag: private credit

The private credit market faces significant risks due to relaxed lending standards and the influx of capital, warns Nick Moakes of the Wellcome Trust. He anticipates substantial losses for investors if the U.S. economy enters a recession. 

While private credit is less systemically risky than traditional banking, diminished checks on borrowing have raised concerns. Rating agency KBRA projects defaults in the sector to rise to 3% by 2025, driven by higher interest rates and vulnerable business models. 

Moakes also criticized large alternative asset managers, noting their focus on asset growth may not align with investor interests. Despite the risks, the Wellcome Trust avoids direct private credit investments but monitors the market through its private equity allocations.

Finsum: With rates moves slowing down we think private credit could have an advantage over traditional fixed income products. 

Point72 Asset Management has tapped Todd Hirsch, a former senior managing director at Blackstone, to lead a new initiative centered on private credit opportunities. Steve Cohen, the firm’s founder, emphasized that the supply-demand imbalance in private credit creates a favorable environment for growth in this area. 

The global private credit market, valued at over $3 trillion, includes prominent firms like KKR, Carlyle, and Ares Management. Hirsch’s role will involve building and managing a portfolio that spans sectors such as technology, healthcare IT, insurance, and payments. 

Initially integrated into Point72’s broader hedge fund strategy, the private credit initiative may evolve into a standalone fund or business, though no definitive plans have been set. Point72, which manages $35.2 billion in assets, is positioning itself to capitalize on this rapidly growing market.

Finsum: We think private credit has shown resilience and is in a good place to begin 2025. 

BlackRock’s acquisition of HPS Investment Partners highlights a strategic push into private credit, a rapidly growing sector where traditional banking once reigned. Unlike BlackRock’s broad focus on public markets, HPS has excelled in targeted private lending, taking calculated risks for higher returns. 

The deal underscores BlackRock’s ambition to rival established players like Blackstone and Apollo in private markets, particularly by expanding its direct lending and junior capital businesses. HPS has historically specialized in funding private equity deals with higher-risk debt, a strategy that has delivered strong returns but also exposed it to occasional losses. 

The acquisition aligns with BlackRock’s vision to integrate public and private fixed-income offerings, particularly for institutional investors like insurers. 

With a solid track record and plans to venture further into investment-grade private credit, HPS is poised to play a pivotal role in BlackRock’s private markets expansion.

Capitol Meridian Partners, a defense investment firm established by former Carlyle Group executives, is ramping up efforts to capitalize on private equity's increasing influence in advancing U.S. defense technologies. 

The firm recently brought on Michael Puopolo, with experience at Blackstone and Carlyle’s aerospace and defense team, as managing director, alongside Curtis Uehlein, a former leader of multiple Carlyle-backed companies, as an operating executive. 

Having raised over $1 billion in its debut fundraising effort this year, Capitol Meridian is directing funds toward aerospace, defense, and government technology sectors. Notable projects include Parry Labs, which develops drone operating systems, and LMI, which supports the Department of Defense in transforming extensive data resources into actionable insights. 

Finsum: There is probably little doubt that a new administration will be more favourable to this type of private equity investments. 

BondBloxx has introduced the PCMM ETF, the first of its kind to provide direct access to private credit markets through collateralized loan obligations (CLOs). This ETF focuses on middle-market companies, a $5 trillion subset of the $30 trillion private credit market, offering diversification for fixed-income portfolios. 

Private credit, characterized by short durations and low correlations to equities, provides resilience against Federal Reserve policy shifts. The fund, which invests 80% of its assets in private credit CLOs, delivers current yields around 7% and charges a 68-basis-point fee. 

PCMM is positioned as a liquid, transparent, and cost-effective alternative to traditional private credit vehicles like interval funds. BondBloxx envisions this ETF as a key tool for financial advisors seeking enhanced returns and diversification in their clients’ portfolios.

Finsum: This is another perfect example of ETFs making alternatives or more complicated assets easier for clients.