At a glance
- Yoseloff, chief investment officer at Davidson Kempner Capital Management, said private credit faces greater challenges than public debt markets as highly leveraged borrowers confront rising refinancing costs.
- For an advisor holding a BDC or an interval fund, Yoseloff's estimate that software accounts for about one-third of private credit loans is a comparison point.
- John Aylward, chief investment officer at Sona Asset Management, said the five-year cumulative default rate in the syndicated loan market has already exceeded the level recorded during the 2008 global financial crisis.
Software companies account for about one-third of US private credit loans, Davidson Kempner's Tony Yoseloff said, describing the concentration as a risk as debt maturities build in 2027 and 2028. He spoke at the Global Financial Leaders' Investment Summit in Hong Kong, according to a Bloomberg report cited by Private Equity Wire and Hedgeweek.
Yoseloff, chief investment officer at Davidson Kempner Capital Management, said private credit faces greater challenges than public debt markets as highly leveraged borrowers confront rising refinancing costs. Software borrowers also face disruption from artificial intelligence, he said.
For an advisor holding a BDC or an interval fund, Yoseloff's estimate that software accounts for about one-third of private credit loans is a comparison point. A fund's software weight can be compared with that share, and the 2027 and 2028 maturities give a window for when the refinancing question gets answered.
John Aylward, chief investment officer at Sona Asset Management, said the five-year cumulative default rate in the syndicated loan market has already exceeded the level recorded during the 2008 global financial crisis. Private credit lends to many of the same private equity-backed borrowers, he said, but typically to smaller and inherently riskier businesses.
Davidson Kempner sees opportunities in performing credit at mid-teen returns, particularly in Asia, and has increased its liquid credit investments there relative to Europe. Yoseloff pointed to Indian first-lien lending and Asian convertible bonds.
Farallon Capital Management chief investment officer Nicolas Giauque said the firm has begun increasing its credit exposure after several years of declining allocations, seeing opportunities in distressed and CCC-rated debt as higher US rates and AI-related disruption create dislocations.
Giauque also warned that global equity markets have grown more correlated as AI-related companies take growing shares of major indices. Broad index hedges may offer insufficient protection against sector-specific shocks after October's technology-driven correction, he said.
Reported by the Private Credit & BDCs desk from Hedgeweek, Private Equity Wire and Bloomberg. Published . Corrections