Private credit lending market, differences between generations in direct lending, emergence of the private credit industry, impact of rising interest rates and high leverage on loan portfolio, yield differential and importance of talent in private credit.
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Quick takeaways
Individual investors can now invest directly in private credit.
Banks have been conservative and hesitant to reenter the private lending market, being replaced by direct lenders and asset managers.
Deep dives
Private credit and its growth in the market
The podcast discusses the growth of private credit and private capital in the financial market. It highlights how private credit has evolved to the point where individual investors can now invest directly in private credit. Asset management firms have come to dominate the space, offering attractive returns and lower leverage for investors.
Potential challenges in the private lending world
The episode explores potential challenges in the private lending world due to rising interest rates. It emphasizes how higher rates can pose problems for portfolio companies with expensive loans, potentially leading to financial difficulties. The episode distinguishes between new loans and existing loans, noting that new loans made at higher rates can offer attractive returns, while existing loans with floating rates may become problematic for borrowers.
The role of banks in the private lending market
The podcast delves into the role of banks in the private lending market. It highlights that banks have been conservative and hesitant to reenter the market, as they have shifted focus from long-term investments to short-term, liquid investments. The episode notes that larger-scale direct lenders and asset managers have replaced banks in the financing space, providing loans that offer higher yield premiums and better financial covenants.
Ken Kencel, CEO at Churchill Asset Management, discusses seeing growth in the world of private credit. Hosts: Carol Massar and Matt Miller. Producer: Paul Brennan.