The confusion around differences between public and private credit dynamics has been compounded by the rapid growth of the illiquid asset class. The middle market was infrequently on investors’ radars until it began to rival broadly syndicated loans and high-yield bonds in size.

At $1.5 trillion, private credit has caught up with both, and by some estimates will more than double in the next several years. That kind of popularity attracts an increasing number of investors (“Wow, what’s this?”) historically in large-cap, liquid strategies. Such a raised profile also has raised eyebrows with regulators and the media (“Wow, should we be worried?”).

These reactions are perfectly understandable. Anytime significant dollars are entering any investment category in a seeming hurry there’s room for deeper scrutiny. Such was the case with SPACs back in early 2021. Special purpose acquisition companies were the hottest thing back then, as we profiled here. And we know what happened to them.

“Everyone in the markets has to get their head around the fact that this may be another year of negative returns for bond funds.”– Bob Michele, chief investment officer, JP Morgan Asset Management.

Featuring Charts

Chart of the Week: 60/40 Hindsight

November 28, 2023

The traditional equities and fixed-income model is under-performing the historic average.  Source: WSJ, Leuthold Group(Past performance is no guarantee of future results.)

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Chart of the Week: Midcap Momentum

November 15, 2023

Churchill’s senior debt portfolio showing higher revenues and cash flows.   Source: Churchill Asset Management LLC(Past performance is no guarantee of future results.)

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Chart of the Week: Book of Jobs

November 8, 2023

The popularity of secondary equity investments has risen markedly since 2016.

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Chart of the Week: No Stopping This Show

November 1, 2023

The popularity of secondary equity investments has risen markedly since 2016.

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Chart of the Week: Novo Nordisk Effect

October 25, 2023

The popularity of secondary equity investments has risen markedly since 2016.

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Chart of the Week: Swede Success

October 16, 2023

The popularity of secondary equity investments has risen markedly since 2016.

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Features

Middle Market & Private Credit – 11/27/2023

Fitch’s Private Middle Market Portfolio, Rating Activity Upgrades/downgrades in Fitch’s PMM portfolio are generally skewed toward downgrades, as issuer ratings can be constrained on the upside based on limited scale…. Login to Read More...

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Private Debt Intelligence – 11/27/2023

North American PD deal value in energy and utilities sector highest in five years  Private debt deal activity in North America decreased in 2023 as aggregate deal value fell to $42.3bn in 2023 year-to-date (YTD) from $172.5bn in 2022…. Login to Read More...

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Leveraged Loan Insight & Analysis – 11/27/2023

BDC credit quality continues to hold up BDC credit quality held up well across different metrics in the most recent quarter. The weighted average non-accrual rate for public and private BDCs combined slipped to… Login to Read More...

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Middle Market & Private Credit – 11/13/2023

Fitch’s Privately Monitored Middle Market Portfolio Overview, 3Q23 Fitch expects revenue growth to moderate to the mid-single digits in 2023 after two strong years of double-digit growth following normalization after the pandemic, given a slowing economy and limited M&A…. Login to Read More...

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Leveraged Loan Insight & Analysis – 11/13/2023

BDC debt valuations increase in 3Q23 BDC debt valuations climbed across the board in 3Q23, with riskier debt outperforming as hopes of an economic soft landing increased…. Login to Read More...

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