This week we chat with Eric Green and Mark O’Keeffe of Muzinich and Co. Muzinich is a global institutional asset manager specializing in corporate credit; headquartered in New York, the firm has offices in London, Manchester, Paris, Frankfurt, Zurich, Milan and Madrid.

The Lead Left: Gentlemen, what’s your take of what’s going on in private credit today?

Eric Green: Well, it’s nice to see it’s an identifiable asset class. That question is behind us. Strategically now pensions, insurance companies and other institutional investors will be part of this global asset class. Of course, there are many components of private debt, including mezzanine. Just like private equity is a big tent, so is private debt. Consultants are figuring out the mix.

TLL: Why is that?

EG: Many asset classes haven’t consistently delivered 6-8%. In the pension and life communities, these return assumptions exist. Illiquidity premiums matter, as firms like LCD have demonstrated. To pick a simple example, there’s a 32% premium between issuers less than $50 million in ebitda and those greater than $50 million. We’ve seen that same differential in bid/offer spreads. The old argument twenty years ago was that private equity could deliver 20% greater returns than the public markets.