Private equity will help private credit weather troubles – Neuberger Berman’s Susan Kasser

People fail to give the private equity funds the credit they deserve, said Susan Kasser, head of Neuberger Berman Private Debt, on the latest ‘Credit Exchange with Lisa Lee’ podcast.

Whilst in terms of investment opportunities, it has been a less productive start to the year, private equity funds have found interesting investment opportunities. Neuberger Berman has already committed to financing a number of new leveraged buyouts this year. There are a surprising number of companies that appear to be quite insulated from tariff exposure and are pretty recession-resilient as well – to a much greater degree than might have been expected, Kasser said.

The beauty of a portfolio of privately-held, privately-negotiated, untraded loans is that concerns, volatility and market sentiment don’t really affect the loans, Kasser told Lisa Lee, managing editor of Creditflux. Rather, the only thing that does impact the loans is the fundamental performance of the companies being lent to. “That will take some time to figure out, but it looks like all should be well,” Kasser said.

Kasser noted that an element of the underwriting that people miss is the importance of the private equity sponsor. They have three advantages in fixing a problem. These encompass control (they can make any change they want to), time (they don’t have to exit at any point in time), and capital (they have capital to support existing investments). A lot of problems, including things like recessions, tariffs, inflation, supply chain issues, and higher interest rates, are, to some extent, temporary and fixable, Kasser said.

Neuberger Berman passes on many financing deals, even those that may look like good opportunities. “You just need to decide which way you want to err. And we have consistently decided we want to err on [the side of] capital preservation, margin of safety, zero mistakes for the investors,” Kasser said.