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Interesting article from the Lex column of the FT today describing the current situation in the PE markets.
With exits at low levels, and in 2023 we were close to a 25 year low in the ratio of distributions back to LPs versus capital calls, the creativity of the PE industry has come into play.
To give investors breathing space for portfolio companies to grow into their valuations, the private credit markets have come to the rescue along with continuation funds and portfolio loans. As interest rates decline these mechanisms will give the PE industry some breathing space as it returns to providing investors with superior risk-adjusted returns.
CLO equity investors are able to lock in tight levels for CLO liabilities today for the life of the deal. As such, investors are creating deals today when they can potentially capitalize on a period of strong credit markets.
Great insights from John Kerschner, Head of U.S. Securitized Products at Janus Henderson Investors, as he seeks identify and debunk the biases that keep some investors from considering an allocation to U.S. securitized fixed income.
Read the full article here: https://hubs.li/Q02ChSBc0#CMBS#FixedIncome#RealEstate#Investing
Great insights from John Kerschner, Head of U.S. Securitized Products at Janus Henderson Investors, as he seeks identify and debunk the biases that keep some investors from considering an allocation to U.S. securitized fixed income.
Read the full article here: https://hubs.li/Q02Cj7Ty0#CMBS#FixedIncome#RealEstate#Investing
Great insights from John Kerschner, Head of U.S. Securitized Products at Janus Henderson Investors, as he seeks identify and debunk the biases that keep some investors from considering an allocation to U.S. securitized fixed income.
Read the full article here: https://hubs.li/Q02ChJF60#CMBS#FixedIncome#RealEstate#Investing
NEW: Fascinating read/visual investigation from the FT here, mapping out the wildly complex layers of borrowing in the private capital ecosystem. Some striking numbers too: the market for the fairly niche lending product that is subscription lines is nearing $1trn, for example.
Given the almost total lack of transparency in the industry, lenders and investors in PE itself will often have little or no idea how much other leverage that a PE firm has taken on both at management company and portfolio company level.
It’s something regulators are now paying attention to but with PE entwined in the real economy of most countries, as well as being a lucrative source of fees for much of the financial services sector, it will be interesting to see how they respond.
Great insights from John Kerschner, Head of U.S. Securitized Products at Janus Henderson Investors, as he seeks identify and debunk the biases that keep some investors from considering an allocation to U.S. securitized fixed income.
Read the full article here: https://hubs.li/Q02Ch_kC0#CMBS#FixedIncome#RealEstate#Investing
CLO equity investors are able to lock in tight levels for CLO liabilities today for the life of the deal. As such, investors are creating deals today when they can potentially capitalize on a period of strong credit markets.
CLO equity investors are able to lock in tight levels for CLO liabilities today for the life of the deal. As such, investors are creating deals today when they can potentially capitalize on a period of strong credit markets.
Brilliant piece, helps us visualize the growing systemic risk in private markets away from any risk metric.
Quoted paragraphs below are particularly telling about the layers of leverage which all eventually rest on the underlying portfolio companies, and how only the GP, and neither the banks or limited partners and certainly not the regulators has any understanding of all those layers of leverage;
“Much of this lending is ultimately underpinned by the financial health of a fund’s portfolio companies. Yet every transaction ends up adding more leverage to heavily indebted businesses, which can make them more vulnerable in a downturn.
The only people with a birds-eye view of the total borrowing across a firm, its funds and their portfolio companies are the general partners.”
Note: Two small misrepresentations in the article; subscription lines don’t have recourse at the portfolio level and only maybe exceptionally, but it’s told here as they do all the time, and secondary funds don’t have cash at hand other than investor commitments.
NEW: Fascinating read/visual investigation from the FT here, mapping out the wildly complex layers of borrowing in the private capital ecosystem. Some striking numbers too: the market for the fairly niche lending product that is subscription lines is nearing $1trn, for example.
Given the almost total lack of transparency in the industry, lenders and investors in PE itself will often have little or no idea how much other leverage that a PE firm has taken on both at management company and portfolio company level.
It’s something regulators are now paying attention to but with PE entwined in the real economy of most countries, as well as being a lucrative source of fees for much of the financial services sector, it will be interesting to see how they respond.
Great insights from John Kerschner, Head of U.S. Securitized Products at Janus Henderson Investors, as he seeks identify and debunk the biases that keep some investors from considering an allocation to U.S. securitized fixed income.
Read the full article here: https://hubs.li/Q02ChHdf0#CMBS#FixedIncome#RealEstate#Investing