How Private Credit Became One of the Hottest Investments on Wall Street
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- เผยแพร่เมื่อ 27 พ.ค. 2024
- Private credit has quickly become one of Wall Street's most popular investment classes in 2023. Alternative data platform Preqin projects this asset class will reach $2.7 trillion by 2027.
Several firms like Apollo Global and Ares Management have grown this market from just $250 billion in 2010.
This happened in part due to banks retrenching from the lending market after the Great Financial Crisis in 2008 with new regulations. It also has roots in the Federal Reserve's monetary policy of holding interest rates near 0% for a decade.
"We had a banking crisis in this country [and] the Fed drove interest rates to zero," said Lafayette Capital founder Damien Dwin. "That's created conditions where alternative investments could flourish, because of the additional yield that can be delivered."
However, this asset class is not without risk and not easily investable. You won't find private credit funds on Robinhood.
"It comes from pension funds, endowments and foundations, insurance companies, retail investors sovereign wealth investors," Dwin said. "So it is loans from a source other than deposits, usually to privately held businesses."
Watch the video above to learn more about what private credit is, how it has changed debt markets, and the risks involved.
0:00 - Intro
1:34 - What is private credit?
4:24 - Why private credit is booming
7:17 - Risks to the financial system
9:08 - What’s next?
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How Private Credit Became One of the Hottest Investments on Wall Street
I came across some statements from big investors expressing concerns that the stock market rally could be short-lived. My concern is my $600K stock portfolio is still recovering from a dip of almost 40%, how do I navigate these complex situations?
Diversification and a thorough understanding of the market dynamics are crucial, especially during periods of uncertainty. Keeping an eye on both the positive and cautionary signals can help investors
Certainly, I've been consulting with a Certified Financial Planner (CFP) since the outbreak. Beginning with an initial fund of $80k, my advisor makes decisions on when to enter and exit positions in my portfolio, which has now expanded to around $350k.
My partner’s been considering going the same route, could you share more info please on the advisor that guides you.
Aileen Gertrude Tippy the licensed advisor I use. Just search the name. You’d find necessary details to work with to set up an appointment.
Aileen Gertrude Tippy the licensed advisor I use. Just search the name. You’d find necessary details to work with to set up an appointment.
Private equity sounds like a mechanism that extracts the most amount of value from a business, and transfers that wealth to the few general partners.
Everyone loses - the business, the employees, the local consumers, the tax payers.... except for the general partners
The people you’re claiming don’t benefit wouldn’t have benefited with or without the private equity buyout. The business was failing before private equity came in, they just more efficiently manage the end of the companies life. Most likely allowing most companies to work there longer than they would have been able to do before.
00:02 Private credit is a fast-growing alternative asset class.
01:35 Private credit offers one-to-one relationships for borrowing outside traditional institutions.
02:44 Private credit has become a popular investment choice on Wall Street.
03:59 Private credit grew after big banks pulled back on lending post-2008 crisis
05:18 Private credit has stepped in to fill the void left by traditional banks due to regulations like Dodd-Frank.
06:33 Private credit fund managers prioritize top tier firms and managers for better returns and reduced risk.
07:50 Risks in the private credit space
09:02 Private credit is expected to be an interesting asset class despite potential market downturns.
doing the lords work.
Good abstract 👌🏾. Thanks 😊
We can't ignore the potential impact on portfolios. Bonds are often considered a safe haven, and if they crumble, investors like me might scramble. I’ve been investing for 11 yrs and my $1m portfolio has never been this depleted, how i do hedge this?
In fact, markets have incorrectly priced in such a pivot six times over the last two years, according to Deutsche Bank, which sounded cautious about this seventh time. Still showing us why pointers from market experts are essential
You have a very valid point, I started investing on my own and for a long time, the market was really ripping me off. I decided to hire a CFA, even though I was skeptical at first, and I beat the market by more than 9%. I thought it was a fluke until it happened two years in a row, and so I’ve been sticking to investing via an analyst.
Please can you leave the info of your lnvestment advsor here? I’m in dire need for one
“CATHERINE MORRISON EVANS’’ You can easily look her up, she has years of financiaI market experience.
Thank you for this Pointer. It was easy to find your handler, She seems very proficient and flexible. I booked a call session with her.
No funding for small businesses and only for large private companies. No more incentives for the average person to open a business
Sounds like a bigger version of what Kiva does for the third-world.
In regards to incentives, that is incorrect. There are more early stage VC firms and angel investors than ever before. But the focus is on modern and scalable businesses which are the new trends now rather than the brick and mortar ones which are being disrupted.
@@jazilzaim which by enlarge are not small businesses.
@@realdeal139 Yea they are. Early stage VC mostly backs very early stage startups with $100k-$300k. The scalable tech companies aren't all Apple, Meta, and Google. Some only have 2-5 employees.
@@jazilzaim Those "asset light", "technology" companies might be a thing of the (negative real interest) past. 99.99% of them were BS money losing growth stories that do nothing but mark up the price of everything!
Fantastic video and commentary!
in fact private credit is the best solution to avoid liability, banks have transferred the credit risk by investing their customers' money in private credit funds and earn money through sales and management commissions... the game is very simple, but no one calls things by their name
In the US, it's called private credit, which is a great thing. In China, it's shadow banking. It's shady and bad.
To simplify, it’s a loan shark
Basically yes hahahaha
Yes and they make up 50% of the credit industry and of that 50%. 90% is managed by 9 companies.
@@jaredrobinson3682one of the best quotes regarding the private credit industry I’ve read!
@@jaredrobinson3682 what are those companies?
Engaging in a single market option is fair lnvestment but its performance level can’t generate high finance growth. Diversifying into various market options is the key to optimal growth, that’s why I have my interest set on options based on projected growth and performance.
can you explain further on the market options you’re into, l’m curious to know more of your lnvestment experience.
To generate massive growth in finance, never engage in a single option rather diversify into various options on high performance with the guidance of a finance consultant will create wealth in your finances.
”Do not lay your eggs in one basket.” I engage on various options (reaI estate, reaI assets, lndex/mutuaI funds, ETFs, annuities, lDOs and others) with the experience of my finance consuItant, and had so far made wealth (amount is confidentiaI)
sear ch the full name below, if you care about creating weaIth
Rebecca Martin Watson
Great video. Thank you
Many thanks and well done !
Do they really have to invent a new term for loan sharks?
These new loan sharks have just made it look more respectable.
Direct lending is not the only type of private debt buddy. There are literally tens of different types of private debt, and the term existed for many many years
"Basel 3, the endgame!" now playing in markets everywhere. Do we really want "shadow banks" to replace regulated banking?
They unregulated ofc not.
Great piece
Thank you!
Economic investigator Frank G Melbourne Australia is following this very informative content cheers Frank 😊
I have a question internet if anyone can help. But does flowing rate work like the combined rate from bond market i.e. fixed rate + inflation rate?
In other words its credit the way loans used to be done before central banks and governments made themselves the only real credit lender. Its nothing new. I'm curious if they've gone all the way back to term payments rather than monthly.
Agree with UBS
Lol also known as shadow banking
Interesting cnbc uses the term shadow banking when it wants to portray the industry negatively (parricularly markets like china etc) and the term private credit when referring to blackstone, oaktree et al
quite interesting
The most sinister things about this video they have told you that private credit is more expensive than banks but no numbers to back it,can't tell which of the accusations of inappropriate lending banks dont themselves engage in
the rich always find a way to keep the money with the rich
This is the basis for Hard Money Loans for real estate
So, basically your Loan Sharks, right? Private Credit is just the rebranding of this racket. Nice!?!
Managing money is different from accumulating wealth, and the lack of investment education in schools may explain why people struggle to maintain their financial gains. The examples you provided are relevant, and I personally benefited from the market crisis, as I embrace challenging times while others tend to avoid them. Well, at least my advisor does too, jokingly.
I don't think I need a finance advisor. I can manage my own money and investments. I don't want to pay someone else to tell me what to do with my hard-earned cash.
@@RobertDamaniiincase you looking to get one I got mine from a friend but you can GOOGLE CHRIS RYAN STEWART. And get to work mate
He appears to be well-educated and well-read. I ran a GOOGLE search on his name and came across his website; thank you for sharing.
Looks efficient from what i am seeing, maybe i will send a mail to get insights
Chris Ryan Stewart works with Merrill, Pierce, Smith incorporated and interviewed on CNBC Television. You can use something else. For me, his strategy works hence my result. He provides entry and exit point for the securities I focus on.
Lending ur buddy $20 is private credit
Debt Debt Debt
Anyone else notice the Cyrillic text on the hundred dollar notes at 2:58?
it says that it is a souvenir 😊
Guys 90% of the private credit industry is managed by 9 companies. THEY ARE NOT REGULATED!!!
There is a massive concentration risk
Credit started private in the beginning. Now its coming back!
It amazes me that nobody even mentions quantitative easing anymore when discussing these "trends". QE leads to negative real interest which has led to crazy high debt for poor returns. Central banks forced commercial banks to hold treasuries with negative real yield. Institutions like insurance and pensions were forced to do something stupid or nothing at all -they prefer getting paid, so they did something stupid!
exactly
@@micro-organism-pv5gd The QE IS the capital flow distortion.
So are you shorting the priivate credit companies?
This is like the biggest unregulated pawn shop ever.
Just another fancy word for "loan."
Credit Card = Loan Card
Mortage: Long Term Loans
But loan doesn't sound good.
That jeopardy opening was terrible... I feel like that's a bit of a cop out.
see it coming
Loan sharking with a nicer name
Read or Watch 'The Great Taking'
'Private Credit' = Loan Sharking
It’s the golden age of private credit, or so I’ve heard
Its obvious that 10% yields involve lots of risks.
Hey stop crashing the party! I just got my champagne glass filled. 😁
Huge respect for you and what you teach us daily. Your videos have helped me grow tremendously and also special thanks to Chris Haun he has been of tremendous help to me through my journey too.
I have never seen a trader as open and transparent as Chris Haun with his clients. The way he decides to make a profit for his clients. He allows you to express your fears and he still rests your fears and that is my respect. I don't normally comment on videos, but this word should be included. He is really cool.
My whole family living fine and my Dad is heading for retirement plan thanks to my broker
I just withdrew my profits a week ago, To be honest it was an amazing feeling when the profits hits my wallet I wish I could reinvest but, too much bills
Basically fancy term for Loan Sharks
📢 WE ARE IN THE GOLDEN AGE OF PRIVATE CREDIT 📢
is private credit cash advance ?
Max was here
i really try to understand stuff like this but i still dont get what private credit is. i feel dumb
You're not dumb certain ideas aren't for everyone.
I'll try to explain, let's say you need a large amount of money for whatever reason (maybe you're opening a business). Usually you'd borrow money from big banks (chase, Bank of America etc) and pay it back with interest. if you are unable to pay it back then they would take your assets (such as a house or car) in order to compensate for their lost money. This is how banks made their money. Privately owned businesses saw this as an easy opportunity to make money so now you can borrow money from these rich privately held business instead from banks. The video also says that the government made it unfavorable for banks to lend money which gave the upper hand to these privately held businesses. So it seems like many people prefer borrowing money from privately held business rather than banks because they have more fluidity with their lending agreements, but it's not always in favor for the borrower. The terms may even be worse than if you borrowed from a bank.
@@BigGirl1351 thankyou that helped alot. i think i get the basics now
@@BigGirl1351 So... a loan shark by another name?
@@devilex121 yup basically a fancy term for a loan shark
Jeder sollte so viel Private Credits zu Minuszinsen erhalten wie man es möchte da es nicht im Ermessen von Banken liegt wie viel hier jedem zusteht.
if you’re concerned about Private Lending not reaching smaller borrowers than why not roll back Dodd Frank and let the banks lend to them? if that happens Banks would then be accused of predatory lending for going after them
Proceed with Caution on-scrutiny of Competition and Market Value before crediting the businesses' investments.
Would a bank that offers credit to businesses necessarily have anything good to say about private credit cutting into their business?
All part of the plan my friends.
Looks like a type of Shark loans entities but "legalized".
Apollo and KKR are great companies!
Is this the same a SPAC?
SPAC raises funds through an IPO with no operations and purchases a company with those funds and takes it public, it’s a completely different thing.
The video is wrong that you can't invest in private credit/debt on Robinhood. PSEC is just one stock a retail investor can buy and gain access to this asset class through their portfolio
PennantPark (PNNT) is another one....
It sounds like the regulations did their job, but then people still want the same level of lending and growth they are used to. So this new strategy is invented, I guess called "private credit". It's like a cat and mouse game, at least that's my initial impression.
Sounds like modern loan sharks with a new name
Is this what shadow banking really is? This just sounds ultra risky for the lender and borrower
So private credit is me i lend money to a big buisness and they pay me back in interest?
I never learned any of this in school.
Loan sharks?
Wow, greed certainly does spur creative thinking. This is so bad on so many levels. I have no issie with some dumb rich person risking what they have for a higher return, though I thought that was called loan sharking and was illegal. However, pensions and hedge funds doing this is incredible bad for the general public.
Isnt this just Shadow Banking that were viral before?
It is a newer version of the hostel takeover of companies.
5:10 focus on 2 things: rated assets and anything with a perception of liquidity
6:10 the banks with bigger earnings and better balanace sheet typically the ones more likely to secure funding in the private credit markets.
6:55 the delta from a top ranked private equity
10:00 the next interesting would be distressed commercial real estate lending, rescue financing
Private credit is also called the shadow banking system
What's the other type of credit 😮
Deb free lot of assets
Rich people skirting regulations
If private credit finance the big boys then banks should just lend to regular people 🤗 don't cry about it😂
0:31 Why are these companies loaning out pensioners money as private credit? It's not their money to loan. This is a disaster waiting to happen. Are these loans even insured?
1:39 if these companies can't money from traditional banks why are these funds giving them money.
This video is extremely misleading doesn't explain the financial risk pose by these private equity credit lenders. Lastly how are we Americans supposed to retire?
tbh not so diffirent from bonds
Really is cause its illiquid and floating instead of fixed.
Liquidity
Hopefully as these companies start taking on the largest corporations then banks will HAVE to go back to actually HELPING the common person instead of repeatedly trying to find ways to victimize them. People who keep calling regulations a victimization of banks are just idiotic, those regulations had to be put in because the banks were victimizing people and the people and the whole economy needed to be protected from the banks.
just ptp
cnbc, give credit with money
These people swallow fire into their bellies for every percent of interest they consume
So shark loans with extra steps!
If groveling over finances floats your boat than that's great.... I'd kinda feel like I'm wasting my life though....
Private Credit is shadow banking
There sure seem to be plenty of opportunities in private credit like investments run by Ares, Apollo, Blue Owl, KKR, and many others through BDCs and public funds (ARDC and the like). They vary widely in risk and return levels, and many are asset backed loans with a low loan to value ratio.
Anything can look like an "opportunity" with insufficient information with no standards, regulation, or enforcement.
Publicly traded BDCs for example -first look "Hmm, that looks like a super cheap buy", second look "how to you do DD with this info???", third look "how can this be an ongoing concern if the cost of capital is substantially higher than market?" Last look "I'll look again after the reorg. clean legal, and all equal info.
Making loans with no deposits: shadow banking. Nothing can go wrong... ask China...
Auction with
Hiding their money more smart
The 2-minute video stretched to 10:29 mins, what a waste of time.
Full BS. Look at ARCC which has been in business since 2004 and outperformed the S&P. Passed the GFC, the recessions, the pandemic. Good BDCs are actually very conservative in their loans with lower non accruals than banks 🙄
You don’t need credit
You do you, but if these people come asking for bailouts then boohoo.
If you look at Indian history, private credit has always existed based on a one to one relationship! With time, the scale has increased
2
You are literally describing a Loan Shark
What differentiates general Scumbaggery from greedy prickery? I honestly could care less and prefer to going climbing and skiing....
Bad bubble
We had bad years and unfortunately the governments and systems in this world wont really help, guess what. But AWT77K brings new light to not only the industry but humans in general and this is how everyone can have power in their own hands. I think we are about to step into a new age and there it matters what you decide for your own life. Too many bad decisions have been done and the conventional living method simply doesnt work anymore. If you really give it a thought then you might believe me on this one. Im not trying to force anybody its just my goal to bring change because even if I succeed for one person it is more worth than any money in this world, isnt it?
Not in a hurry to buy here as big financial issues are about to be recognized, IMO. Banks are in big trouble and over-leveraged (bail-ins?), debts are out of control; peeps CC's are maxed, and globalists think we should depopulate, eat bugs, and be controlled for their benefit. This should all get resolved very soon, might be very bumpy for a while, but peace and tranquility on the other side.
There's so much f*ckery in markets that they may just close for good. I'll be patient for better clarity over the next 2-3 weeks,At this point, I'm still at a crossroad regarding whether or not to liquidate my $138k stock portfolio. What's the best way to take advantage of this current market?
🤫
Lol well, no.
Unregulated assets class? 😂
I'm favoured, $60K every week! I can now give back to the locals in my community and also support God's work and the church. God bless America,, all thanks to miss Patricia
Same here, with my current portfolio made from my investments with my personal financial advisor (Patricia McDonald) I totally agree with you
YES!!! That's exactly her name (Patricia McDonald) so many people have recommended highly about her and am just starting with herfrom Brisbane Australia
I have heard a lot of wonderful things about Patricia McDonald on the news but didn't believe it until now. I'm definitely trying her out
Such a genuine personality!!, Sincerely speaking. I will continue to trade and stick to Patricia McDonald daily signals and guides as long as it works well for me.
This sounds so good and I would like to be a party to this, is there any way I can speak with her?
The SEC is just mad that AWT77K exists this way and that they have to face that and cant hold things longer, time for some last minute buyins on their own end