Future of private credit
Been noticing alot more players joining into the private credit market. Its a little worrying knowing that as more players join it will only get more competitive with pricing and yields will most likely start to decrease. Similarly to private equity, theres only SO many good deals available. I personally think that there will be even greater need for the credit equivalent of secondaries. Curious to hear others thoughts.
Based on the most helpful WSO content, it seems that the future of private credit is indeed a hot topic. There's a general consensus that the market is becoming more crowded as more players join in. This could potentially lead to increased competition and decreased yields. However, there are a few factors that could differentiate the successful players:
Having multiple strategies: This could include direct lending, special situations, structured equity, etc. This allows for more opportunities to find good deals versus just one strategy. When the market's hot, your direct lending team is on fire, and when the market's down, your opportunistic credit team is finding toeholds.
Pricing power: This will matter more in a crowded market. For example, if you're a brand new credit fund, you might get beat up on rates. However, if you're a well-established player, you're likely to have more pricing power.
Novel channels to source deals: Having unique ways to source deals will be very valuable versus being someone on the list every fund calls. For example, credit funds that are part of larger organizations can use the entire organization to source deals from all the areas they have their tentacles in.
In terms of the credit equivalent of secondaries, it seems like there's a consensus that there will be a greater need for this in the future. However, it's also important to note that the world is absolutely flooded with debt these days, and the best paid investors of the next couple decades are likely to be in private credit. The skills required to participate in that movement might be more technical than traditional business skills.
Remember, the market is always changing and it's important to stay informed and adaptable. Keep swinging from those branches, and you'll find the ripest bananas!
Sources: https://www.wallstreetoasis.com/forum/credit/private-credit-will-it-hold-up?customgpt=1, What replaces Private Equity? What's the next popular exit opportunity?, Private Equity vs. Private Credit
bump, keen to know
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