Rixon Capital’s Post

History doesn't repeat itself, but it often rhymes (Mark Twain). As private credit continues to boom, sub investment grade credit is luring a new cohort of investors, but do they really understand what they are investing in?   Apostle’s Tony Breen shares his insights with AdviserVoice Pty Limited on the potential risks associated with Australian private credit and the five questions you must ask your private credit manager.   Follow the link here: https://lnkd.in/g8a7xtN5   #Privatecredit #Privatemarkets #Investment

In April, the Bank of England’s Financial Policy Committee and the Prudential Regulation Authority (PRA) released speeches discussing their concerns with the evolution of private equity financing. The PRA then sent a Dear Chief Risk Officer letter outlining its concerns, particularly focusing on the procedures required for banks to address potential private equity financing risks. Banks are required to share results of benchmarking exercises with their board risk committees and the PRA, including plans for addressing any gaps, by August 30, 2024. Sebastian Barling | Robert Chaplin | George Gray | Noel Hughes | Greg Norman | Benjamin Lyon | William Adams | David Wang #privateequity #financialinstitutions #regulation

Rhizome Advisory Group’s credit risk specialists will be publishing a series of risk insight articles exploring the risks and opportunities for private credit investing as it relates to the superannuation industry. In this first article we provide an overview of the asset class and the imminent risks. Later articles will explore what Responsible Superannuation Entity Licensee directors and executives should be asking to ensure that they are challenging and testing their approaches to credit assessment and investment. We look forward to your thoughts, opinions and questions as we explore this asset class in our series of articles. #riskmanagement #creditrisk #investments #superannuation #australia https://lnkd.in/gNHJWgNR

A good article on Private Credit in the AFR today aligns with my post on what to look for in a Private Credit Fund from a couple of weeks ago. In any investment identifying potential red flags is paramount to safeguard investments. Here are some cautionary signs to watch for: Team Size and Experience: A lean team might indicate operational vulnerabilities. It's essential to assess the depth and breadth of the team's experience in credit analysis and management. Track Record: A history of less than two years could imply that the firm is still navigating its learning curve. The longevity and consistency of performance are key indicators of a firm's capability to manage risks and capitalise on opportunities. Licensing: The absence of an AFSL or reliance on a borrowed AFSL might signal a lack of commitment to long-term operations within regulatory frameworks. Promotion of Returns: An overemphasis on high monthly returns and return targets without a balanced discussion on risks involved can be a red flag. Sustainable investing requires a careful evaluation of both returns and risks. Yield Chasing Behaviour: High yields are enticing but understanding why certain opportunities offer higher returns is crucial. The "salty peanut" analogy serves as a reminder that higher yields can come with higher risks, and not all high-return investments are created equal. Read more: https://lnkd.in/g9Tx_6wr #iPartners #privatecredit #alternativeinvestments

Thomas Speller, CFA, a Managing Director within the Funds Rating Group at global, full-service rating agency KBRA, chats to Private Equity Wire about the current state of the private credit market and some of the challenges and opportunities facing private credit funds and their managers… Read the full article 'KBRA: putting excellence and integrity at the heart of credit funds rating' here:https://zurl.co/ylFe

At the Fund Finance Association conference in Miami, I had a number of meetings with rating agencies, including a breakfast learning session with Standard & Poors Ratings Services, a meeting with Egan-Jones, and a chat over drinks with Fitch Ratings on the Seward & Kissel LLP yacht! Why all the hubbub about ratings lately? While the presence of rating agencies in leveraged finance and securitizations has been common for a long time, ratings associated with credit facilities for “alternative investment funds” is relatively new territory. The story of the past year in the #fundfinance market, especially in the US, has been the tightening supply of liquidity. The findings in Haynes and Boone, LLP's recent report on the #fundfinance market are consistent with a supply/demand mismatch – margins have widened on subscription lines as demand has outstripped the available supply. Rating agencies are circling the #fundfinance market because they believe they can offer a solution to this liquidity crunch. This plays out in a number of ways. First, banking regulators use a concept called Risk Weighted Assets (RWA) to evaluate the banks that they supervise. Based on the risk level of the assets, the regulator will require a bank to hold different levels of capital (i.e., the excess of assets over liabilities) in order to absorb losses from loans. Under the “Basel III Endgame” – which the US is in the process of implementing and the EU and other jurisdictions have already adopted – ratings provided by external rating agencies receive much more favorable treatment than credit risk ratings generated internally by a bank. For example, a European bank joining a #fundfinance facility that is rated, even if the rating is private, will get much better capital treatment, which is a win for the bank because the bank can then use more of its capital buffer to make loans and therefore be more profitable. In addition, there has been much interest in the US in obtaining #fundfinance loans from insurance companies. Insurance companies, which are regulated by the National Association of Insurance Commissioners (NAIC), can generally only invest in loans with external ratings. Therefore, in order for insurance companies to lend to private equity and other funds, the facilities provided to those funds need to have a rating. Each rating agency has a different methodology for rating #fundfinance facilities. Most, however, distinguish NAV facilities secured by the fund’s investments (where they need to consider the ability to liquidate those assets) from subscription lines (where they consider the credit quality of the investors, the reputation of the general partner, and the risk appetite of the GP generally, but typically not market risk).

I recently had the privilege of participating in a panel discussion hosted by Greenwich on the “Growing Demand and Access to Private Credit.” This insightful conversation delved into the evolving private credit landscape, exploring key trends, challenges, and opportunities within this dynamic sector. Our discussion covered: 🔹 The increasing demand for private credit solutions 🔹 Innovative strategies for accessing private credit markets 🔹 The impact of economic shifts on private credit investments I’m thrilled to share this engaging session's key takeaways and perspectives. Whether you’re an investor, financial advisor, or simply interested in market trends, this discussion offers valuable insights into the future of private credit. Check out the full panel discussion here: https://lnkd.in/gRh4JCXv #PrivateCredit #InvestmentStrategies #Finance #MarketTrends #GreenwichPanel #FinancialInsights

We continue to see the growth of private credit domestically & many of our clients benefit from our ability to navigate these markets. This article gives some very interesting insight into the massive scale of US Private credit markets and investor appetite ... will we follow? #developmentfinance #propertyfinance #nonbanklending #privatecredit

In a recent Bank of England speech, concerns were raised about UK banks needing to monitor their exposures to the robust $8 trillion private equity sector more closely. While recognising the need for vigilance, it’s important to acknowledge the crucial role of private equity in driving economic growth and innovation. These firms not only manage complex investments effectively but also substantially boost economic dynamism. As banks enhance their risk management, the strategic value and resilience of private equity should also be appreciated, ensuring a balanced approach that supports both stability and growth.    🔗 Read the full article here: https://lnkd.in/eaSGnBaR Contact the team at Altus Partners, part of The LCap Group, to learn more about our approach to private equity search, our portfolio practice or how we can assist with your financial recruitment: https://lnkd.in/eEirmBfr    #privateequity #executivesearch #debt #investment #economy The LCap Group: Drax Executive, Drax Affinity, Rowan, Leadership Dynamics and PACE.

Australia’s premier private credit event for senior representatives of institutional asset owner organisations is fast approaching. We are excited to host this market leading event on Thursday, 2 May 2024 at the Grand Hyatt Melbourne, bringing together global thought leaders in the asset class together with senior institutional asset allocators looking to develop or expand their private credit programs, for a highly interactive day of discussions with peers and investment experts. Topics to be covered include: 🌎 Global asset owner perspectives on investing in private credit: US case study 📈 Modelling and monitoring risk within a private credit portfolio to maximise performance 🏛 Asset backed finance as a diversifier to private corporate credit allocations and impacting the housing crisis through alternative credit 📝 Assessing the financial stability of underlying borrowers and managing deals at risk of going bad 🌐 A nuanced approach to direct lending panel discussion: Determining relative value across market segments and geographies 🤝 Lifting the veil on private credit market participants and their capital solution needs 💼 Investor panel: Asset owners sharing experiences investing in private credit, featuring Future Fund, Insignia Financial, Resolution Life and more… Limited seats remain. To request the agenda or to express your interest in attending the event please contact Zlatan or email zlatan@globalii.com.au.