The Business Council U.S.’s Post

Good highlights by Financial Times from Ken Moelis' talk at Goldman Sachs’ financials conference this week. The global financial crisis of 2008 happens: "The crisis happens, and I think the regulators start waking up to the fact that financing of system with 5-day deposits, 5-day liquidity on deposits and 5-year loans is a bad business. And by the way, everybody said, ‘08 only happens once every 1,000 years. Well, that’s bullshit. There was — as I said, they wouldn’t have made the movie. It’s a Wonderful Life if it happened once every 1,000 years. 80 years ago, Mr. Potter had to jump in and stop what was the bank run. There’s no — I think it was Mr. Potter. He might have been the bad guy, right? Mr. Potter, I think is the bad guy. Then March 2023 happens: But the — it was 5 days now SVB, Credit Suisse and the rest of it happens, First Republic, and you figure out it’s 5 seconds. 5 seconds and no relationship, no time for Mr. Potter to ask you not to take your money out, and that’s just completely not acceptable for the taxpayer to bridge the gap on that basis. And I think the regulators saw that. And that’s why they’re making it so difficult for the banking system now to put these assets on their balance sheet. So the whole system, all these M&A that was set up to bring investment bankers in to create assets is a dead system." Maybe banks should not be in the storage business? "I think that system is being squeezed out by the regulators. By the way, I think it’s the right answer as the taxpayers should not be funding the largest banks ability to go into fintech and do all sorts of things. I mean if you’re going to be regulated, utilities are regulated. They don’t even have their liabilities guaranteed, but they can’t do super growth things. They can only do things that are in the interest of what the regulation is for. And for some reason, we had the banks out of that for many years. It’s going away." https://lnkd.in/dNKy9C2J

For the past year, I've been vocal about the potential pitfalls of private credit. Now, Bloomberg News is echoing these concerns. Thanks for high-quality reporting, Kat Hidalgo! "A year since Blackstone Inc. President Jon Gray hailed a “golden moment” for private credit, the shine is coming off Wall Street’s new money spinner. The pace of buyouts is slowing, and some private credit funds are struggling to return cash to their investors. Banks are back, contesting deals and undercutting direct lenders on margins. “There has been an erosion of the private credit illiquidity premium,” said Matthew Bonanno, managing director at General Atlantic’s credit unit. “I think there is some frustration from LPs on this,” he said, referring to the limited partners such as pension plans and insurance companies that allocate capital to private credit funds. ** As stewards of substantial family wealth, it's crucial to ask the hard questions. Are you being "sold" on private credit without considerations for the risks? Just as pension funds and insurance companies scrutinize these investments, so should you. The landscape is shifting, and it's more important than ever to stay informed. #WealthManagement #InvestmentStrategy #PrivateCredit Disclaimer: This post is for informational purposes only and does not constitute investment advice. Please consult with a professional advisor before making any investment decisions.

“With increasing volatility in traditional capital markets over the past few weeks, highlighted by plummeting stock prices, private credit has become a flexible and reliable alternative. When traditional capital dries up, it provides businesses with the necessary funds to navigate challenging economic conditions and pursue growth opportunities. Branching out into private credit has also become a way for investors, or limited partners, to diversify their holdings, providing a much-needed buffer against macroeconomic and inflationary headwinds while protecting against price fluctuations in public markets.” Source Pensions & Investments (pionline.com): https://lnkd.in/ebR_bfhS #AlternativeInvestments #NextEdgeCapital #PrivateDebt #PrivateLending #PrivateCredit

UBS, J.P. Morgan and Stifel Financial Corp. are among some of the world's largest banks expanding their wealth management services in South Florida. That's because the demand for comprehensive wealth services in the region has spiked-- with the wealth demographic shifting from what was once just retirees and trust fund heirs/heiresses to founders, CEOs and managing partners migrating to the region from high-tax states. These entrepreneurs need more than just a boutique wealth office to manage their stocks and bonds. They need an institution equipped to handle any of the major liquidity events that could transpire from their businesses and advisory services for an array of complex assets.

"I think over time, the companies are going to say, I mean it’s all novel last year that this was happening, but they’re going to say, well, aren’t there like 10 of these firms that can do $5 billion direct and their boards or their advisers everybody is going to say, “Well, why don’t you give it to an independent [boutique bank] and let them auction that and find out if there’s 50 basis points more you can get, run a clearing price on a $5 billion deal, why wouldn’t you? Why wouldn’t you talk to 5 different capital sources and run a mini process and get the best terms and the best — I mean that’s what you do on investment-grade financing, you go out and you talk to everybody and you don’t just take anybody’s bid, you take the best bids." https://lnkd.in/dfD_PfVr

Why business successions are rewarding transactions for brokers After a disruptive start to the 2020s, more business owners are considering retirement. To do so, they often look to a competitor, employee or family to buy them out, creating an opening for brokers to help finance a smooth succession. We explore how brokers can maximise these opportunities with our chair of advocacy David Gandolfo OAM. Read the full article: https://lnkd.in/gQDMmyF7 Article by Commonwealth Bank #successionplanning #smallbusiness #brokersarebetter #commercialfinance #assetfinance #smefinance

I recently had a conversation with a senior Treasurer at a sub-investment grade company regarding her firm’s credit facility. Like many of her peers, their credit facility was uncommitted, resulting in concerns about the stability and long term nature of the arrangement. She discussed the risks to the business if the bank decided to pull her credit line, and wondered how she should think about that scenario from a risk management perspective.     We discussed the situation and came to a simple conclusion. If she felt the bank would offer the credit facility with her current financials she should have some degree of comfort. However, if she had any doubt as to whether the bank would extend her credit based on those financials, she should be looking for alternate sources of capital.   In ongoing conversations with our clients we stress the importance of redundancy in capital sources. Uncommitted credit facilities, although common in many industries, are a real risk in today’s market, especially where banks are looking to reduce risk more aggressively. As a result, we believe corporate clients need to have alternative and redundant sources of capital, and at Evolution we are well positioned to provide short and long term capital to corporates traditional banks may not support.   https://lnkd.in/e-8CvfbF

Institutional investors are evaluating private credit collateralized loan obligations (CLOs) with growing concerns about liquidity and valuation. The rapid growth of the private credit market has led to increased scrutiny, as these investments often lack the transparency and liquidity of public markets. Investors are particularly worried about the potential for valuation discrepancies and liquidity strains, which could impact their portfolios https://lnkd.in/gFtGNT52

"The financial firms are all trying to hitch their wagons to a fast-growing area of the market that can generate hefty fees. They are also adjusting to a fundamental economic shift in which more companies have delayed or forgone public listings while nonbank lending has expanded." #PrivateWealth #WealthManagement #RealAssets #PrivateMarkets #AlternativeInvestments #Alts #UHNW #HNW #FamilyOffices #IBD #RIA #PrivateInvestments #PrivateCredit #PrivateEquity #RealEstate

First it was #NAVloans, then #SRT, now its #capitalcall #ABS. The #structuredfinance alphabet soup is back on Wall Street. Taken individually none of these innovations seems particularly problematic, or remotely as risky as RMBS and CDS became before the #GFC. Buuuut ... in aggregate they set my spidey sense tingling. It's not so much the underlying credit risk that makes me go hmmmm, it's the interconnection between massive asset managers, asset owners and the banks through complex and opaque private transactions. None of that correlation is measurable by regulators, much less the market, right now Here's my latest attempt to connect the dots. Goldman Sachs, Blackstone Apollo Global Management, Inc., KKR, GIC, Abu Dhabi Investment Authority (ADIA), Texas Municipal Retirement System (TMRS) Kentucky Public Pensions Authority, U.S. Securities and Exchange Commission, Institutional Limited Partners Association (ILPA)