About this episode
The extraordinary growth in private credit markets has led some investors to question its risks. We go in depth on our recent report, Is private credit a bubble? to offer answers.
Join Chief U.S. Economist Lara Rhame, Managing Director of Credit Wealth Solutions Robert Hoffman and Executive Director of Research Andrew Korz as they examine important questions on transparency, the quality of borrowers and the rapid flow of money into this key asset class.
Transcript excerpt
Andrew Korz (00:00): That growth in private equity market has really catalyzed the growth in private credit. So, if you look at just today, the private equity space has about $2 trillion of dry powder to invest, right? So, what that tells me is generally these companies today are going to be about 50% equity, 50% debt. That’s about $1.8 to $2 trillion of financing demand from private equity sponsors alone.
Lara Rhame (00:25): Welcome back to FireSide, a podcast from FS Investments. I’m Lara Rhame, Chief U.S. Economist, and today’s episode of FireSide is going to focus on a question that hovers in the background or maybe the foreground of our conversations around private credit. Is private credit a bubble? To address this very critical question, I’m joined today by Andrew Korz, a Director on our Research team and an expert in all things private credit. Andrew, welcome.
Andrew Korz (00:55): Hi, Lara, how are you?
Lara Rhame (00:57): I’m great. I’m excited to tackle this head on. I think the other person that is joining us is the guy. We’re lucky enough to have him in our home office in Philadelphia, but he is on the road all the time. He is in advisor offices, he’s at conferences talking about this. Robert Hoffman, our Managing Director of Credit Wealth Solutions. Rob, welcome.
Rob Hoffman: Thank you. Always great to be here.
Lara Rhame: This is the dream team to break this apart. And Andrew, you and Alan on our Research team wrote a great paper, several months ago now, that breaks down this question, and I want to reiterate something because the overarching question, “is private credit a bubble,” is important to address, but behind that, [there are] important questions regarding transparency of the asset class, the rapid flow of money into that asset class, the quality of borrowers in the asset class.
These are related questions that are important to address, and I think we value education above all. And so, I really encourage you, if you want data on this topic to really take 10, 15 minutes to read this paper. It’s listed in the show notes. It is an incredible paper that’s gotten a huge amount of traction and I think is a great companion to the discussion that we’re going to have.
And so, with that said, I’m going to dive right in and make it easy and just hit Andrew with that question.
