00:00Private Credit Fund, managed by Aries Management Corporation, has posted its steepest monthly loss on record in February.
00:06The results provide further evidence of deteriorating performances in the $1.8 trillion private credit market.
00:12Let's bring in the editor of Bloomberg's Going Private newsletter, Sinead Cruz.
00:17Sinead, another headline, another day. What do these numbers tell us about the state of the private credit industry?
00:23Well, in a nutshell, I guess they start to tell us that we should be looking for modest declines in
00:29performance.
00:30In private credit. Now, the Aries Fund posted, as you said, its steepest decline in, on record, 0.68%
00:40decline.
00:41Now, to be clear, Aries uses public debt markets to help assign prices to its illiquid private credit assets.
00:50And it says that this decline was actually a reflection of the conditions in the public debt markets as well
00:59as private credit.
00:59Does it always release this data? Is it to calm nerves?
01:03I mean, Lloyd Blankfein yesterday literally said, look, you can't tell because if you're not trying to sell this stuff,
01:08you don't know what a buyer will pay.
01:10Yeah, I mean, the public discourse is definitely heating up.
01:15Lloyd had some quite striking comments about the fact that, like earning private credit to potentially Tinder,
01:22and all it needs is a spark to to a light. Now, I think the the implication is that he
01:29suggests that there may be stale valuations that are overhanging the market that are perhaps stirring some of these concerns
01:36among investors.
01:37What am I invested in? How much is it actually worth? So, yeah, he's he's he's made his feelings clear.
01:45But there are there are others out there on the on the on the conference circuit.
01:49We've seen comments from top executives at Blackstone and Apollo who are suggesting that actually the defaults do not match
01:59the dramatic headlines out there,
02:00that there is no systemic risk in this asset class.
02:03Well, that's just it. You would expect people in the industry and people that are, you know, at the helm
02:09of all these funds to be defending them.
02:12Right. But are there are there sort of neutral people that are also positive this asset class, given that we
02:18really don't know?
02:19I mean, there's a difference between something going down in value because people have decided they want to be more
02:24liquid again and they don't like this idea of being locked up and something going down in value because it's
02:28mispriced or there is some kind of problem with it.
02:30Yeah. Well, I guess we also had news this week about one of the ratings firms now starting to take
02:40a slightly more negative view on the debt profile of of these these funds.
02:46So these funds don't all use some of their capital is a combination of investor money and leverage.
02:52And some of the ratings agencies are now looking at that and wondering whether or not there is an issue
02:58about the quality of the loans, the assets that these funds are holding.
03:03So perhaps perhaps that is one independent, unbiased voice that we should pay attention to as we try and track
03:10the continued noise about this asset class.
03:14Yes. Well, we will be having more conversations, that's for sure.
03:17Sinead Cruz is editor of Bloomberg's Going Private newsletter, which is published twice a week.
03:21Head to Bloomberg.com slash newsletters to subscribe.
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