00:00And Silas, this was also the fund that we already had some controversy around, right, that was going to merge
00:05with a public fund, and then those plans were shelved.
00:08Yeah, you're right. I mean, it's had a bit of a tricky past few months, but I mean, I think
00:14it's reaching some form of conclusion.
00:15I think Bluart has taken the decision to basically sell direct lending investments across three funds and distribute portions of
00:26that cash to investors, which is a novel way of dealing with investor withdrawals and sort of dissimilar to the
00:34kind of conventional wisdom, which is to basically handle investor redemptions on a quarterly basis.
00:41So it's a kind of novelty. I mean, the fund itself is slightly, it's dissimilar to the classic non-traded
00:48perpetuals that we see more frequently nowadays.
00:52So it has its own kind of kinks and kind of curiosities. But I mean, I think the headline thing
00:57is that this is a sort of, yeah, this is a conclusion of a rather kind of chaotic episode for
01:04this fund.
01:05Is there a way in which we can expand this out to the sector as a whole, Silas? Because when
01:11you have these retail traded private credit funds, the criticism has always been a liquidity mismatch. Does this speak to
01:17that?
01:20Fantastic question. And I think that is right. I mean, I think that I think if you spoke to private
01:24credit funds over the course of their of their history,
01:28they say one of one of the great advantages with this market is that we don't have liquidity mismatches that
01:33have felled banks and other financial institutions for, you know, for decades previously.
01:39And I think that the issue more broadly for private credit is they in a bid to attract retail retail
01:46money.
01:47They've developed these structures through the BDC industry. I mean, for a long time, but it's reached a sort of
01:53fever pitch in the last few years.
01:55And it has exposed some level of vulnerability for the industry because ultimately, as is very obvious, it's an illiquid
02:02asset class.
02:04And so if you're dealing with, you know, heavy redemption requests, it's a tricky it's a tricky position to be
02:10in.
02:11And Blue Owl has been somewhat of the poster child of this of this thing.
02:14And I mean, Blue Owl, you know, it's a it's a big, you know, leading private credit player, you know,
02:19one of the one of the largest and sort of most kind of penetrated across across all of different forms
02:25of private credit.
02:26But it has found itself in the sort of epicenter of this of this kind of potential vulnerability for the
02:33for the industry.
02:34And you can see that reflected in the share prices themselves.
02:37What what has Blue Owl said about this, Silas?
02:40And by the way, we invite Mark, anyone from Blue Owl to come on the show and discuss it themselves.
02:44But what has been their response to the concerns about halting redemptions and the way that they're going about selling
02:50loans?
02:51Well, I mean, I think that I think they're literally on a call right now.
02:54But I think as far as I as far as I know, I mean, they see this.
02:58They see this development as a positive thing.
03:00I mean, what they say, really interestingly, they've sold slivers of direct lending investments and they've sold them very close
03:07to par.
03:07And I think one of the kind of more nuanced points that I think Craig Packer said was, you know,
03:12this shows the resilience of our portfolio because we, you know,
03:15we've basically given these investors, you know, sight of of our direct lending investments and kind of the marks that
03:22we're ascribing to them.
03:23And they've decided to buy into them at near par, which I think is an interesting and notable point to
03:29point to raise.
03:30I mean, I think they see this as kind of a good win for a good win for investors and
03:35a good win for themselves.
03:36And I mean, it's certainly I think it's a I think that the issue maybe for investors is is not
03:42necessarily this is a conclusion,
03:44although this is still, I think, being borne out through different for there'll be different investor perspectives on it.
03:51But I think the issue is is more there's been a series of different decisions being made over the over
03:58the fate of this fund over the past few few months.
04:00And that level of, I guess, like turbulence is probably suboptimal.
04:05You know, maybe maybe you can't draw the two together.
04:08But just as you were speaking, Silas, I was also thinking about Apollo's earnings when they were talking about the
04:13degree to which they've been trading high grade private loans.
04:16Ten billion dollars is what they said last year, that this is a market that's more liquid and more transparent.
04:22Is this Apollo just talking their book, talking about what they're doing, the trading that they're trying to establish with
04:28private credit?
04:29Or is there something to it?
04:30Is there more liquidity for this market?
04:32Is this something that Blue Owl is also trying to do and trying to highlight with their retail funds?
04:38Yeah, I think it's I think it's important always with private credit to delineate where the sources of capital come
04:43from.
04:43And Apollo, although it is, again, alongside Blue Owl, one of the leading proponents and providers of private credit, I
04:49mean, they have a different they, you know, due to the kind of relationship with the theme and the kind
04:57of heavy, I guess, reliance on on insurer capital.
05:01They have a somewhat of a different proposition to other private credit providers.
05:06And so they have lent more heavily into the kind of great, expansive world of investment private investment grade private
05:13credit, which is a sort of pretty uncharted territory for the industry.
05:16And they've been kind of leading the charge trying to do these more complex, idiosyncratic financing deals for larger kind
05:25of more blue chip companies.
05:26And I think their frustration is due to the elasticity of the term private credit, people are drawing criticisms on
05:34the industry.
05:35When actually what they should be drawing criticisms is is on leveraged lending, which was kind of where the market
05:42evolved from.
05:43But in Mark Rowan and other Apollo people's opinion is not where the market is leading towards, which is more
05:50kind of high grade opportunities.
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