00:00I feel like we have to start with private credit, given all the headlines this week.
00:04Investors are seeking redemptions. Firms are limiting or halting withdrawals.
00:08Dominic, has private credit turned into a bit of a roach motel?
00:11You can check in easily, but you can't really get out.
00:16So first, thanks for having me.
00:18Yes, private credit is at the center of many, many discussions out here from credit investors,
00:23but also from every investor around the world.
00:25So it's a good time to be a credit strategist, I guess.
00:28So our view on this is that there is stress, but it's not systemic.
00:33And the way we get to this conclusion, just very quickly, there's four risks we're looking at.
00:38What is the liquidity? What is the contagion risk?
00:41What is the risk in the structures? What is the credit risk?
00:44What is quite clear is private credit is quite exposed to the software sector.
00:48The AI disruption is putting some of these names into question.
00:51As the previous speaker just said, you need to re-underwrite quite a few of these names.
00:55But we think it's a slow burn rather than an immediate implosion here.
00:59So, Winnie, let me come to you, because as for who is behind the redemption request,
01:03it's not clear whether it's retail investors or maybe even some of the family offices
01:07that a lot of these firms are now targeting.
01:09I'm curious, how stable is the investor base for these private credit funds?
01:14Yeah, I think this is a great question and one that gets a little bit lost sometimes
01:18in the private credit discussion. As it is a very opaque asset class, there's been a lot of growth
01:23on the institutional side with pension funds, insurance companies being very tied up in private
01:29credit. And from a liability asset matching perspective, a lot of those funds make sense
01:35from an investment portfolio decision standpoint.
01:39Now, on the retail side of things, we do estimate that about less than 10% of private credit,
01:45really direct lending, is owned by retail investors. And while that's a very manageable
01:51number overall, you can see significant swings in how an asset class is viewed, how it's marked,
01:58and the type of liquidity provided to it when you have just a smaller proportion of investors
02:03that are trying to reassess and perhaps leave the asset class.
02:07that's a real stuff together.
02:07we know how we can deal with the dollar prices.
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