Displaying items by tag: private credit

Apollo Global Management Inc. is exploring the possibility of establishing a trading desk to buy and sell direct loans in the $1.7 trillion private credit market, which is typically illiquid. While the plans are still preliminary and could be abandoned, Apollo’s interest follows similar moves by other firms like Golub Capital and JPMorgan Chase. 

These firms are actively trading private loans, although such transactions remain rare due to lenders' preference to hold debt until maturity. Concerns exist that increased trading could undermine the benefits of direct lending, such as privacy, convenience, and price stability. 

However, secondary trading could be attractive to investors looking to enhance liquidity or reposition their portfolios. As the private credit market evolves, trading direct loans might become more common, especially for distressed assets.

Finsum: As a key figure in the space its important to keep an eye on the changes Apollo is making in private credit. 

Direct lending, once a niche market for companies with lower credit ratings, has expanded into a powerful alternative for both middle-market and large-cap firms, managing nearly $1.7 trillion by mid-2023. 

This growth has been fueled by private credit’s ability to offer flexible, borrower-friendly terms, even in billion-dollar deals traditionally dominated by banks. Banks, recognizing this trend, are now entering the direct lending space themselves, fostering competition that benefits borrowers with better pricing and more tailored financing solutions.

 As direct lending continues to grow, it's poised to play an increasingly vital role in funding mergers, acquisitions, and other corporate transactions, especially as the market prepares for potential interest rate changes later in 2024.

Finsum: It’s worth monitoring banks direct involvement in direct lending, because this could change the evolution of the industry. 

Golub Capital is increasingly active in trading private credit deals, reflecting a broader trend in the industry as interest in secondary markets for direct loans grows. The firm traded approximately $1 billion in private debt during the first half of the year, positioning itself as a key player alongside others like JPMorgan Chase. 

While secondary trading in the $1.7 trillion private credit market remains relatively uncommon, there's growing demand for liquidity and flexibility among investors. However, some industry participants argue that trading could undermine the appeal of direct lending, which traditionally offers privacy and stability. 

Despite this, Golub and other firms are exploring these markets, balancing the benefits of liquidity with the traditional advantages of private credit.

Finsum: For investors not concerned with liquidity, private credit could prove a strong investment in this fall cycle. 

As the $1.7 trillion private credit industry faces a significant fundraising slump, firms like Adams Street Partners, Antares Holdings, and Hayfin Capital Management are focusing on Latin America. They're targeting pension funds and wealthy individuals. 

Philippe Stiernon of ROAM Capital notes that scarce capital in the US and Europe is pushing managers to diversify. With institutional investors in the US and Europe at saturation points, funds are exploring Latin America for new growth. 

This region offers safer investments compared to its volatile domestic debt markets. Stiernon describes Latin America as "the last major frontier for LP growth" in the alternative investments landscape.

Finsum: This presents an opportunity to ultra diversify and get truly uncorrelated turns as we move into a potentially tumultuous election cycle. 

The rapid growth of private credit lending beyond its traditional markets highlights concerns about its opaque nature and potential risks to the U.S. economy, according to Moody's. Non-bank private credit lenders are increasingly competing with traditional banks by offering non-publicly traded debt to mid-sized corporate borrowers. 

This trend has expanded into alternative lending opportunities such as asset-based financing. Despite banks refinancing significant debt and providing leveraged loans for M&A deals, private credit lenders are finding new opportunities. 

Regulators and the IMF have expressed concerns about the potential risks and lack of transparency in this growing market. Four major alternative asset managers have significantly increased their credit assets under management, further highlighting the sector's rapid expansion.

Finsum: We probably aren’t close to a regulation overhaul with private credit but transparency is worth considering.