Companies Aren’t Defaulting, But How Much Longer Can They Pay 12 to 14 percent?

In episode 5, Julie talks to Oliver Fadly of NEPC about why he’s cautious on private credit right now after the explosive growth in the asset class over the last 15 years, why he expects much more transparency in the coming years, and why it’s hard to find managers with true track records that you can dig into to get a picture of their investment chops. Oliver and Julie discuss the good and the bad of consolidation and the increasing number of smaller private credit shops that are getting acquired by or doing joint ventures with larger asset managers.
And amid all of those deals, Oliver is watching the inevitable shift in talent. Top people are getting contracts to stay for three or five years, but what’s happening to the people below that?

Oliver also talks about portfolio finance and so-called NAV loans, which have been increasing — and why he’s pretty cautious (again that word!) about the sector and spending time trying to understand the motivation behind both the private equity firms that are taking on these loans and the credit funds that are making them.

Oliver also speaks to capital structure stress, the result of a lot of private credit deals being done at the peak when rates were near zero. These companies have now burned through a lot of cash, and while there still isn’t a huge wave of defaults, there are a lot of hard conversations to come. For investors, there may be opportunities to provide transitional capital to get a company “to the other side,” as Oliver points out.

As always, I want to hear your thoughts. Email me at jsegal@institutionalinvestor.com or message me on LinkedIn. Which reminds me that I have to get back to a listener, who told me I should have asked a previous guest a few more questions. He’s right and I’ll respond. Thanks for listening everyone.