Why Private Credit's Been Booming Even as Interest Rates Go Up

Odd Lots

Bloomberg

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4.4 • 1.6K Ratings

🗓️ 20 November 2023

⏱️ 49 minutes

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Summary

It's no secret that the market for private credit has boomed in recent years. The surprising thing is that it has continued to do so even as interest rates have surged, defying many people's expectation that this relatively new market would suffer once an era of "loose" money comes to an end. Instead, the market for private credit in the US now rivals the size of the market for publicly-traded, junk-rated corporate bonds. But what exactly is private credit? How does it differ from broadly-syndicated stuff like leverage loans and corporate debt? How susceptible is it to higher rates? What is driving continued interest in this asset class? And what could cause it to wobble? On this episode we speak with Laura Holson of New Mountain Capital — where she manages about $9 billion across various private credit investments — about how the industry works.

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0:00.0	To me, context is about pattern recognition.
0:02.8	It's connecting the dots.
0:04.4	It's giving readers an ability to synthesize
0:07.6	a number of different perspectives
0:09.2	so they can understand how the greater whole works,
0:12.0	because nothing really occurs in isolation anymore.
0:14.4	I'm Tim O'Brien and I'm the senior executive editor at Bloomberg Opinion.
0:18.0	On our platform, we ask tough questions and solve complex problems with the facts in mind.
0:23.0	Start exploring our opinion coverage and more at Bloomberg.com slash subscribe. Hello and welcome to another episode of the Odd Lots Podcast I'm Joe Wiesenthall.
0:45.0	Joe Wiesenthall.
0:47.0	Joe, what do you know about private credit?
0:49.0	I know it's grown a lot.
0:52.0	I know it's pretty good. I mean that's the important thing. It's private and there's credit
0:57.0	involved. Okay. I think that's about and I know it's grown and I think that's about the extent of it.
1:02.8	Yeah, all right.
1:03.8	No, I actually, wait, can I just add a little more?
1:05.8	Maybe.
1:06.8	No, I get the, my sense is that for whatever reason and this I don't know, people
1:12.2	perceive there to be opportunities in private like you know there's private equity buying
1:17.2	Stakes there's VC etc but people see an opportunity in pools of capital that are then lent out.
1:23.2	Another, you know, lending that's not through banks.
1:25.5	That's it.
	...

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