“We are late in the credit cycle.” What is often a throw-away line preceding some dire market prediction, should be questioned. Are we measuring from the GFC? Are we ignoring the multiple speed bumps – COVID, bank failures, tariffs, rate shock – since then?  Regardless, a major sustained downturn since 2008-09 has not materialized. Clearly…

According to Merriam-Webster, apophenia, or mistaken pattern recognition, is “the tendency to perceive a connection or meaningful pattern between unrelated or random things.” We see this happen all the time in capital markets.  After the GFC, the usual suspects were rounded up. While sub-prime mortgages were clearly the culprits, leveraged loans and CLOs were also…

For over a decade, software has been the darling of investors. The reasons were evident long before the pandemic made the sector impossible to ignore. Recurring revenue, high retention rates, and sticky enterprise contracts offered lenders a business model that was both predictable and perceived to be resilient through any economic downturn. The pandemic accelerated…

What is a loan worth? At its core, a loan’s value is driven by two forces: credit risk (the likelihood the borrower repays) and market risk (the rate and spread that determines the investors’ demand to hold it). With today’s macro noise, questions about the accuracy of value, or “marks,” have grown louder. Yet loans…

Beyond structural pressures, liquidity mismatches, and conflation with large cap strategies, the most fundamental question for any credit investor: What is the actual risk of losing money? Structural protections are built into core middle market (CMM) loans because they are illiquid and intended to be held to maturity. Unlike large cap cov-lite deals, CMM loans…

The word “private” in private credit signifies not just “non-public,” but “non-traded.” This is important from an investor perspective because it means you cannot readily buy or sell private assets the way you can stocks and bonds. These assets are called alternatives because they — like real estate and infrastructure — complement liquid assets. It…

In private credit, the character of your deal sourcing determines the destiny of your portfolio. How new transactions come in the door, and how you choose the best ones to close, drive your performance. Nothing else matters. As we’ve learned in this series, private credit developed from the core middle market (CMM) (see Chart of…

As we highlighted last week, the zero-rate period post-GFC allowed private equity firms to buy companies with higher leverage and sell them at higher multiples. For the largest direct lenders, this included mega software businesses with increasingly borrower-friendly financing terms. Reality returned in 2022 as SOFR soared from zero to 5%. Financing costs became headwinds,…

According to iCapital, private credit refers to “tailored financing options – typically loans – that are directly made to strategically identified companies by non-bank lenders. These…may include direct loans, distressed debt, asset-based loans or specialty finance solutions.” Unfortunately, the term has become a stand-in for bubble risk, panicking retail cash, and scavenging insects. This framing…

“Private credit is, by its nature, still an illiquid asset class.” No amount of wishing will make it otherwise. As a superb report by Hightower Advisors details, understanding that truth is key for retail investors to sort through today’s market noise. For while private credit is being held for questioning under suspicion of…well, everything, hundreds…