00:00What are we not talking about enough?
00:01I know we've talked a little bit about private credit.
00:03You don't think it's sort of a systemic risk at this point?
00:09I think credit formation around the world is really correlated to economic growth and economic activity.
00:19I do think that we've gone, if I just look at the U.S. market, which is obviously, when you
00:24talk about private credit,
00:25a very, very large market in the context of private credit, we've gone a long time without a credit cycle.
00:30We've gone a long time without a recession.
00:32I do think when you have these long-dated cycles, there are a variety of things that happen.
00:36One, credit spread's narrow.
00:38Two, lending standards.
00:40People have more capital to deploy.
00:42They get aggressive.
00:43Lending standards deteriorate a little bit.
00:45Due diligence standards deteriorate.
00:46And so we're watching very closely to see if there's been a little bit too much aggression, frothiness in those
00:52markets.
00:52But fundamentally, when you look at the underlying credit portfolios, particularly below investment-grade credit,
00:57while there have been a bunch of idiosyncratic events where there have been problems,
01:02the broad portfolios are performing reasonably well.
01:05Why are they performing reasonably well?
01:06Because the economy's doing fine.
01:08And it's very hard to have broad underperformance in a broad, diversified credit portfolio if the economy's doing well.
01:15When we do have a slowdown in the economy, you will see it.
01:18I think because of the length of the cycle, you probably will find places where the losses are higher than
01:23people expect.
01:23We're very, very focused on back leverage and things that could affect or amplify in a more difficult economic environment.
01:31You know, credit deployment.
01:32But at the moment, when you look broadly across portfolios, we're not seeing things that are super concerning.
01:38That's a completely different issue than retail participation and retail investors wanting liquidity from what are fundamentally illiquid products.
01:46And so that's getting a lot of attention, but that's different than the underlying credit portfolios.
01:51But I do think that when there is a slowdown in the economy or we do get to a place
01:55where we have, you know, a recession,
01:58you're going to see losses in credit portfolios.
02:00And, you know, those losses could be meaningful.
02:03But, you know, we'll watch that closely.
02:04While the economy's chugging along, you know, that's not the primary focus.
Comments