There Is No Bubble in Private Credit, Koch Says

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00:00In recent years, the private credit market has arisen, and that is a market where you're getting

00:04higher interest rates but higher risk, and that market is not really regulated by the federal

00:10government. Are you worried that when interest rates go up or down at some point or there's a

00:15credit squeeze, the private credit market may not do as well as people think it will?

00:20I don't think there's a bubble in private credit, which would require some massive

00:25imbalance of demand and supply. I think those are largely in line. We know demand's rising,

00:30and we know that supply will continue to come because the banks can't finance in the way that

00:35they used to. I do think that there is the potential of some dislocation in that market,

00:41and I think that there could be some accidents because we've put so much money out so quickly,

00:46and we are seeing a deterioration in underwriting standards. So more pick interest, higher leverage

00:53in the part of the portfolios, we're seeing more extensions. And so there's probably going to be

00:58some incidents. And what you're going to see is manager dispersion, which you haven't seen in a

01:02long time. But we continue to think people should be allocated to it and just be thoughtful about

01:06where they're committing capital. Do you worry that if there is a dislocation of private credit,

01:11the federal government will come in and say, we're going to regulate private credit,

01:14or you're not that worried about that?

01:15I actually think that if it becomes larger, it likely will have more regulations on it.

01:24I'm not sure that that's something I worry about. It's just something I expect to happen,

01:27and we have a long history of investing in regulated markets.