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Odd Lots, Sonic AI
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Odd Lots
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Private credit funds that have grown 10x in the last decade have likely not increased their deal sourcing capabilities by the same magnitude.
Expert perspective
Odd Lots
Apr 27
The Osterweis Strategic Income Fund is a $5.8 billion open-end mutual fund structured as a 40-act fund.
Official source
Odd Lots
Apr 27
The cumulative returns of the high-yield bond market beat the equity market for the 20-year period from 1999 to 2019.
Expert perspective
Odd Lots
Apr 27
Some private credit funds have experienced 10x growth over the last five to ten years.
Expert perspective
Odd Lots
Apr 27
The rapid growth of private credit was fueled by investor demand for yield during the zero-interest-rate environment and by highly levered borrowers being shut out of the bank lending market.
Expert perspective
Odd Lots
Apr 27
Post-financial crisis banking regulations explicitly prevent banks from lending to companies with greater than six times leverage, creating a vacuum filled by private credit.
Expert perspective
Odd Lots
Apr 27
The Cliffwater Corporate Lending Fund (CCLFX) experienced significant asset growth in the last five years, particularly in 2022.
Expert perspective
Odd Lots
Apr 27
Private credit lenders were persuaded to finance software LBOs at high multiples, such as 16 or 17 times EV/EBITDA, partly because sponsors contributed larger equity checks, like 40% instead of the ty...
Expert perspective
Odd Lots
Apr 27
Unlike private equity funds which call capital after finding an investment, most private credit funds take investor money first and then seek investments, creating pressure to deploy capital.
Expert perspective
Odd Lots
Apr 27
Intense competition among private credit funds for deals has resulted in lenders offering lower interest rates and weaker covenants to borrowers.
Expert perspective
Odd Lots
Apr 27
The need for private credit funds to quickly invest incoming cash from retail investors has led to a degradation of credit underwriting standards.
Expert perspective
Odd Lots
Apr 27
Some Wall Street analysts have suggested that default rates in the private credit market could reach 15%.
Speculative
Odd Lots
Apr 27
In the current interest rate environment, it is very difficult for a company to recover from being six times levered.
Expert perspective
Odd Lots
Apr 27
There are significant fears that recovery values on defaulted private credit loans will be low, particularly for highly levered companies with few hard assets.
Expert perspective
Odd Lots
Apr 27
If investor inflows slow, private credit managers facing redemption requests will have to either sell their highest quality, most liquid assets or finance the redemptions with debt.
Expert perspective
Odd Lots
Apr 27
A protracted redemption cycle in private credit could lead to funds becoming more leveraged while holding poorer quality assets, increasing the risk of a blow-up.
Expert perspective
Odd Lots
Apr 27
Firms like Oaktree Capital Management are expected to raise special opportunity funds to acquire stressed or distressed private credit loans from other managers.
Speculative
Odd Lots
Apr 27
Redemption gates in private credit funds, often set around 5% per quarter, are designed to align with the natural maturity schedule of the underlying loans.
Expert perspective
Odd Lots
Apr 27
In 2022, private credit funds appeared to perform well because they were not marking their assets to market, which attracted significant investor inflows.
Expert perspective
Odd Lots
Apr 27
A significant dispersion in returns is expected among private credit managers, ending a period where most funds showed uniform performance.
Expert perspective
Odd Lots
Apr 27
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