Navigating Risks and Opportunities in the Credit Market

Financial institutions are selling off consumer loans under pressure from regulators, setting up investors for significant gains, according to Mark Jenkins, head of global credit at Carlyle Group Inc. “Banks in the US in particular are managing down their risk-weighed assets, and that is creating a deluge of opportunities for us,” he tells Bloomberg News’ Lisa Lee and James Crombie, and Bloomberg Intelligence’s Robert Schiffman, in the latest Credit Edge podcast. Debt being offloaded by banks includes credit card, student and housing loans — which are repackaged into asset-backed securities — and is flowing at a clip Jenkins says he’s not seen before in his 33-year career. Carlyle is also finding elevated returns in high-grade private credit, though Jenkins says stress may show up in direct loans made to companies in 2020-2021, when prices were at an all-time high and rates fell to near zero. In this episode, Jenkins also discusses how Carlyle is testing artificial intelligence for investment decision making, but says it’s too soon to discern a credit-investment strategy focused on AI. “There are those opportunities, but they aren’t directly on the engine of AI — it’s really the infrastructure of AI that we would look to support and build out,” he says.

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