How Inflation Affects Asset Performance

Higher inflation generally impacts fixed income assets negatively as increased rates erode bond values. Yet so far, as our Chart of the Week shows, those rates have actually decreased, resulting in fixed income instruments returning better yields for the second quarter. Higher rates will benefit floating-rate instruments. As our high-yield bond friend Marty Fridson reported […]

Not Your Parents’ Inflation

We caught up with Joseph Lavorgna, Natixis’ chief US economist, who served recently as chief economist of the National Economic Council. “People forget what real inflation is,” he told us. “I was seven years old during the oil embargo in the 1970’s when there were gas lines. Oil prices went from $4/barrel to $40. Imagine […]

Inflation: A Transitory Thing

We continue our special inflation series with Nuveen’s chief investment strategist, Brian Nick. Are inflation worries overblown? “Prices of certain goods and services are rising for a variety of reasons,” he told us, “all we believe will be transitory. April’s CPI report showed inflation will peak at a higher level this year than expected. But […]

Inflation Worries: Real or Imagined?

The Federal Reserve is standing firmly behind its view that, despite April’s CPI increase of 4.2%, the highest since 2008, any inflation will be transitory. But some observers worry that pent-up consumerism will create inflation akin to the 1970’s. In a thought piece published last month entitled “Why Our Managers Disagree on Inflation, Interest Rates […]

Benchmarks Compared: BSL and MM

A question came from a reader on our series about the Lincoln Senior Debt Index. She asked: “I’m curious how the benchmark accounts for where the loan is in the cap structure? Recovery rates for unitranche, 1st lien and second lien are different. So any portfolio would have to match the composition to effectively compare […]

Private Credit: Components of Returns

Private debt is a relatively recent entrant to the alternative asset class. In 2007 private debt AUM measured less than $200 billion. Today illiquid credit is $900 billion with growth estimates of 50% over the next 5 years. The Lincoln Senior Debt Index provides lenders and investors a much-needed tool to assess portfolio performance and […]

A New Benchmark for Direct Lending

Private debt practitioners have noted the shortage of credible benchmarks against which to compare various managers’ performance. Well, our friends at Lincoln International have decided to do something about it. Their team has developed a loan index created from the 2400 private companies they value. Leveraging expertise across that broad middle market portfolio affords Lincoln […]

CLOs: Risks and Opportunities

News reached us from Mars of the first powered Earth aircraft to fly on another planet. Ingenuity, a helicopter with four foot wide blades (and carrying a small swatch from the original Wright Brothers bi-plane), hovered at ten feet for 30 seconds then came back down. “What the Ingenuity team has done,” a NASA official […]

Covid and Middle Market CLOs

Leveraged lending is competitive. But it pales in comparison to the 2021 Mrs. Sri Lanka pageant. Reigning Mrs. World champion, Caroline Jurie yanked the tiara off newly-crowned winner Pushpika DeSilva, charging Mrs. DeSilva was not married. Mrs. DeSilva fled the stage in tears. Order was eventually restored. Mrs. DeSilva reclaimed her crown, and Mrs. Jurie […]

CLOs: The Rebound

By blocking the Suez Canal last month, the Ever Given made headlines, creating a massive shipping traffic jam. Three football fields long and weighing 250 thousand tons (by comparison, the Statue of Liberty is only 125 tons), the monster container vessel is the new global transportation reality: 90% of the world’s goods travel by water. […]