Back in October 2020 we introduced the concept of how supply and demand imbalances in private markets affects credit quality and performance. Too much capital chasing too few deals leads to overly aggressive terms – great for issuers, but for investors not so much. 

In the immediate aftermath of Covid, conditions were quite different than they are today. Deal flow had seized up. Credit managers of all stripes were busy assessing whether liquidity was sufficient to keep portfolio companies going. Consumer-centric industries such as retail and restaurants were reeling. Private capital fundraising had slowed markedly compared to 2019. 

“This performance,” we wrote four years ago, “is due less to COVID than the massive 2019 capital raise by mega-funds; a challenge to match this year.”