The proponents and beneficiaries of private capital have long recognized its virtue of being less correlated with headline risk than fixed income and public equities. But one of Covid’s most enduring financial legacies was the higher interest rate regime imposed by the Fed in 2022.
While it appears their long-sought soft landing was achieved, more costly financings of leveraged buyouts and M&A resulted in a $3 trillion backlog of unrealized value held in businesses to be sold globally. That iceberg would have been slow to melt if the Fed continued its pause on rate cuts. The question is, will that dynamic change amid looming tariff threats?
That seems to depend on whether rate direction will be more influenced by higher inflation kicked off by a trade war (up), or the increased likelihood of an economic slowdown (down). Of course, a recession is not the ideal method to improve financing conditions. But the threat of one could compel more clarity and moderation on the policy front...
“Right now, the concern on growth is impacting the markets more than inflation.” – Adrian Helfert, chief investment officer, alternative and multi-asset portfolios, Westwood Holdings. (WSJ).
Featuring Charts
Chart of the Week: The Shortest Month
After peaking last fall, leveraged loan returns dropped sharply in February. Source: PitchBook
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Chart of the Week: Liquids Lag
Return performance of broadly syndicated loans consistently lags private credit. Source: Hamilton Lane, Bloomberg, The Daily Shot.
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Chart of the Week: Working From Home
Slower M&A has extended time PE-owned companies in portfolios to ten-year high. Source: PitchBook
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Chart of the Week: Home in the Range
The threat of tariff-triggered inflation should keep Fed Funds rates range-bound. Source: iCapital, Bloomberg, Federal Reserve.
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Chart of the Week: Still Growing
The strength of the US economy since Covid is expected to continue this year. Source: iCapital, Bloomberg.
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Chart of the Week: Up the Middle
Total middle market loan volume for 2024 at $51.3 billion was the highest in eight years. Source: Fitch Ratings, Lev Fin Insights.
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Bloomberg: Leveraged Lending Insights – 3/17/2025
US Leveraged Loan Primary Market Slowdown Continues After a record start, US leveraged loan launches last week fell to their lowest level this year at just $10.56b. This week, just $4.51b has launched through March 19th, as the pace of issuance over the last four weeks has slowed to an average of $14.4b compared to…
Middle Market & Private Credit – 3/17/2025
Lender-Sponsor Dynamics Mark Default Outcomes for Private Credit Click here to learn more. Join Fitch Rating upcoming Webinar: The Highs and Lows of Private Credit Defaults and Recoveries The lender-sponsor partnership, a hallmark of the private credit segment, may result in a structurally higher default rate compared to the broader leveraged loan universe…. Subscribe to
The Pulse of Private Equity – 3/17/2025
Identifying likely buyout take-private targets Download PitchBook’s Report here. Since the inception of the buyout strategy in the 1980s, buyout managers have maintained a core playbook: At a reasonable price, invest in relatively small, underperforming companies that still generate enough free cash flow (FCF) to service an increased debt burden…. Subscribe to Read MoreAlready a member?
Leveraged Loan Insight & Analysis – 3/17/2025
Refinancings continue to dominate institutional loans calendar in 1Q25 Despite steady loan market liquidity and unabated demand for assets, new institutional loan volume – at US$37bn – has been limited in early 2025…. Subscribe to Read MoreAlready a member? Log in here...
PDI Picks – 3/17/2025
Measuring the pain points Liquidity and exits loomed large in our survey of LP and GP concerns. An exclusive PEI survey of more than 100 LPs conducted ahead of our NEXUS 2025 event revealed seven main pain points in the LP-GP relationship ranging from liquidity and exit challenges through to fees and expenses…. Subscribe to
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Beginning in July 2022 The Lead Left published a series of articles on credit market. This report consolidates those articles.
Cov-lite trends Inflation & rising interest rates – LIBOR to SOFR transition Mega-tranche uni trend ESG takes center stage Login to view interactive report and download PDF version. … Subscribe to Read MoreAlready a member? Log in here Related posts: 2H 2021 Midyear Outlook Report State of the Capital Markets – Fourth Quarter 2016 Review and
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