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Ali Hamed - Building an Investment Firm - [Invest Like the Best, EP.362]
Invest Like the Best with Patrick O'Shaughnessy
The Risks of Regulated Capital and Old Asset Classes in Credit Investing
Old asset classes like auto and student loans have been heavily bid against over time, leading to decreased yields. These asset classes are rated and held by regulated institutions like banks and insurance companies, resulting in cheap capital with low returns. Competition from regulated organizations makes it challenging for credit investors to earn money based on risk. Blowups in credit often involve old asset classes, while newer, well-structured and properly-sized investments like income share agreements do not pose similar risks. Investing in less-known markets where regulated institutions are not yet involved can offer better opportunities for credit investors, allowing them to capitalize on emerging trends and avoid over-competition in mature asset classes.
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