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Cloud 9fin
What could go wrong in the 'golden age' of private credit?
Nov 20, 2024
Dan Zwirn, Co-founding CEO and CIO of Arena Investors, delves into the complexities of the private credit market. He challenges the notion that we are in a 'golden age,' addressing the oversaturation and risks tied to direct lending. Zwirn discusses how monetary policies may impact investments and the rising bankruptcies in the space. He highlights the challenges faced by both General Partners and Limited Partners, along with strategies to navigate this evolving landscape, emphasizing a cautious yet opportunistic approach.
35:50
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Quick takeaways
- The competitive private credit sector has led to relaxed lending practices, resulting in lower quality loans and diminished returns.
- Despite challenges in the market, adept investors can find opportunities in distressed assets and newly issued loans with attractive returns.
Deep dives
The Evolution of Private Credit
Private credit, specifically direct lending, has significantly evolved since the Global Financial Crisis (GFC) of 2008. Initially an idiosyncratic lending niche, it has transformed into a structured asset management industry. This shift has led many general partners (GPs) to prioritize selling products over delivering high-quality investments. As a result, while direct lending is often perceived as the most straightforward and understandable type of private credit, the reality is more complex, and the appeal of such loans varies greatly depending on market conditions.
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Discover
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Listen to the best highlights from the podcasts you love and dive into the full episode