FireSide: Answering the burning questions around private debt – Part 1

Private debt is a rapidly expanding market that has become critical for the U.S. economy and an opportunity for investors. In Part 1, we discuss the fundamentals of the market and trends driving its growth.

Listen on Spotify Listen on Apple Podcasts
April 25, 2024 | 29 minute read

About this episode

Private debt is a $1.6 trillion market that’s critical to our economy and to investors—and it’s rapidly evolving. As banks have retreated from certain kinds of lending, private lenders have stepped in to fill the gap, allowing investors to reap the potential rewards.

Join Chief U.S. Economist Lara Rhame, Head of Credit Wealth Solutions Rob Hoffman, and Executive Director of Research Andrew Korz for an initial dive into the private debt market, including the fundamentals of the asset class, recent trends that have fueled its growth and a discussion around the investment case for private debt today.

Transcript excerpt

Lara Rhame: Welcome back to FireSide, a podcast from FS Investments. I’m Lara Rhame, Chief U.S. Economist, and today we’re going to talk about a $1.6 trillion market, one that is rapidly evolving and is critical to our economy and to investors—it’s private debt. I’m pleased to be joined by Robert Hoffman, a Managing Director and Head of Credit Wealth Solutions. Rob, it’s a rare treat to have you in the office these days. You’ve been out on the road a ton, talking to investors and advisors. Welcome.

Rob Hoffman: Thank you very much. It’s always great to be here.

Lara Rhame: Also in the studio is Andrew Korz, an Executive Director on the research team. And you’ve recently coauthored an incredible paper on this topic. I’m going to give several commercials for it throughout this podcast today but if you are interested in private debt, you will want to give it a read. Andrew, welcome.

Andrew Korz: Thank you, Lara. They keep me cooped up in the office, much more so than Rob. So, they don’t let me out much.

Rob Hoffman: I was there once. They set me free.

Lara Rhame: All right, Andrew, I’m gonna pitch the first question to you because I know that there has been a lot of buzz around this space and this asset class, but take us through sort of the 101, what is private debt?

Andrew Korz: Yeah, I think it’s smart to start there because it has changed and shifted over time as the asset class has grown. So private debt, just to kind of set the baseline, private debt is just the debt of a private company or a borrower that’s extended by, or held by, a non-bank lender. Very simply, that’s the broadest definition.

People frequently use private debt and private credit interchangeably. Private credit is, again, the most commonly cited part of private debt, but it’s more specifically directly originated loans to corporate borrowers. So, I think it’s helpful to kind of frame out the private debt market more broadly.

This information is educational in nature and does not constitute a financial promotion, investment advice or an inducement or incitement to participate in any product, offering or investment. FS Investments is not adopting, making a recommendation for or endorsing any investment strategy or particular security. All views, opinions and positions expressed herein are that of the author and do not necessarily reflect the views, opinions or positions of FS Investments. All opinions are subject to change without notice, and you should always obtain current information and perform due diligence before participating in any investment. FS Investments does not provide legal or tax advice and the information herein should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact any investment result. FS Investments cannot guarantee that the information herein is accurate, complete, or timely. FS Investments makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information.

Any projections, forecasts and estimates contained herein are based upon certain assumptions that the author considers reasonable. Projections are necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the projections will not materialize or will vary significantly from actual results. The inclusion of projections herein should not be regarded as a representation or guarantee regarding the reliability, accuracy or completeness of the information contained herein, and neither FS Investments nor the author are under any obligation to update or keep current such information.

All investing is subject to risk, including the possible loss of the money you invest.

Andrew Korz, CFA

Executive Director, Investment Research

Lara Rhame

Chief U.S. Economist + Managing Director

Robert Hoffman, CFA

Managing Director, Credit Wealth Solutions

Search our site