Carlyle Flags ‘High Teens’ Middle-Market CLO Gains

Private credit is getting squeezed by excess demand for limited deals, but AllianceBernstein says it will continue to pay more than publicly traded debt. “Even as base rates have come in, that premium remains fairly persistent,” said Matthew Bass, the firm’s head of private alternatives. “If the premium gets too small, then as an investor, you’re going to start to question: ‘Why am I locking my capital up?’,” Bass tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Tolu Alamutu in the latest Credit Edge podcast. Bass and Alamutu also discuss recovery in commercial real estate, asset-based finance opportunities by sector and the advent of exchange-traded funds for private debt.See omnystudio.com/listener for privacy information.

The best credit opportunity lies in middle-market collateralized loan obligation equity, according to Carlyle. “It is a newer market and not everyone’s investing and chasing that asset class,” said Lauren Basmadjian, the firm’s global head of liquid credit. “We’re seeing mid-to-high teens IRRs,” Basmadjian tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Mike Campellone in the latest Credit Edge podcast. That compares to 12%-13% internal rates of return from CLOs backed by broadly syndicated loans, she adds. Basmadjian and Campellone also discuss growing risk from liability management exercises, private/public debt convergence, default rates, M&A and European leveraged loan market opportunities.See omnystudio.com/listener for privacy information.

As trade wars intensify, inflation persists and geopolitical risks spread, Pimco is finding value in the debt of large US banks and leisure-sector companies. “There are some really strong spots within lodging, cruise lines and the like,” said Sonali Pier, who focuses on multi-sector credit opportunities and is a senior member of the $2 trillion asset manager’s leveraged finance team. Pimco is meanwhile cautious on retail and autos, especially in Europe, Pier tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Jody Lurie, in the latest Credit Edge podcast. Pier and Lurie also discuss private debt relative value, asset-based finance opportunities and how to navigate creditor conflict when borrowers fall into distress.See omnystudio.com/listener for privacy information.

Goldman Sachs is advising credit investors to protect against losses amid expensive valuations and rising geopolitical turmoil. “The cost of hedging is the lowest it’s been in probably a very long time — use that to your advantage,” said Lotfi Karoui, the firm’s chief credit strategist. “Look at that left tail of the distribution — the known unknowns, the unknown unknowns, the things that can take you off guard,” he tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Robert Schiffman, in the latest Credit Edge podcast. Despite this, Goldman is positive on the corporate debt market outlook, given very strong demand for limited supply, and sees opportunities at the single name level. Karoui and Schiffman also discuss “absolutely remarkable” value in mortgage-backed securities, the default rate, private market relative value, downgrade risk from a forecast pick up in dealmaking and European bond opportunities.See omnystudio.com/listener for privacy information.

Corporate debt is well placed to withstand global turmoil caused by new US trade policy, according to Crescent Capital Group. “There is going to be a lot of volatility, but I think the markets are now becoming more accustomed to not reacting to those headlines,” said Chris Wright, the firm’s president and head of private debt. “Credit markets are pretty stable,” he tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Julie Hung, in the latest Credit Edge podcast. Wright highlights pro-growth policies of the new US administration and presence of business-friendly people in very senior roles, and views tariff announcements as a negotiating tactic. Wright and Hung also discuss inflation, consumer trends, private debt returns and default risks, as well as the need for scale to compete in direct lending.See omnystudio.com/listener for privacy information.

As rates stay high, bank lenders retreat and volatility rises, Gramercy Funds Management sees significant growth in private credit to developing nations. “We’re just scratching the surface in emerging markets,” said Robert Koenigsberger, the firm’s founder, chief investment officer and managing partner, referring to private debt. “It’s really exciting to go deeper and broader in EM as an asset class with the tools that have proven to work already,” he tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Tolu Alamutu, in the latest Credit Edge podcast. Koenigsberger and Alamutu also discuss EM private debt returns, default risks, real estate investment strategies, US tariffs and trade policy, as well as recent deals in Mexico and Turkey.See omnystudio.com/listener for privacy information.

UK-based Pemberton Asset Management has widened its scope to stay ahead in the increasingly competitive world of private credit. “You’ve got to have a range of products that people think are relevant and attractive,” said Symon Drake-Brockman, the firm’s co-founder and managing partner, referring to net asset value financing, collateralized loan obligations and risk sharing, among other businesses. “We can build large verticals in each one of those strategies,” he tells Bloomberg News’ James Crombie and Silas Brown, and Bloomberg Intelligence’s Jeroen Julius, in the latest Credit Edge podcast. Drake-Brockman and Julius also discuss relative value between US and European private credit, areas of stress and whether US deregulation will boost competition from traditional lenders. “If you’re a chief executive of bank, you’ve got to make sure the pendulum doesn’t swing back the other way in four years’ time,” said Drake-Brockman.See omnystudio.com/listener for privacy information.

Centerbridge Scans Consumer Pain as Inflation Lingers (Podcast)Stubbornly high prices are a threat to consumers that could bleed through to credit markets, according to Centerbridge. “The rising cost of goods and interest rates will have an impact,” said Aaron Fink, the firm’s head of asset finance. “To the extent we see deterioration in jobs, and in the labor market more broadly, that’ll be problematic,” he tells Bloomberg News’ James Crombie and Carmen Arroyo, and Bloomberg Intelligence’s Himanshu Bakshi in the latest Credit Edge podcast. Despite this, Centerbridge still sees significant opportunity in consumer finance. Fink and Bakshi also discuss how a new US administration will affect private credit via trade policy and regulation, growth in fundraising from private wealth and retail, as well as investment in data centers to support artificial intelligence.See omnystudio.com/listener for privacy information.

Debt spreads are set to tighten further as demand for yield rises and net supply remains constrained, according to First Eagle Alternative Credit, which is cautious about the year ahead. “Stay conservative — that’s the mantra that we’re operating under,” said Jim Fellows, the firm’s co-president and chief investment officer, referring to leveraged loans, private credit and high-yield bonds. “You don’t see a lot of screaming value,” he tells Bloomberg News’ James Crombie and Bloomberg Intelligence senior credit analyst David Havens in the latest Credit Edge podcast. Havens and Fellows also discuss opportunity in asset-based lending, middle-market loan pricing and covenant trends, as well as the outlook for buyout finance and private credit defaults.See omnystudio.com/listener for privacy information.

A sustained period of elevated interest rates has the potential to cause pain in the fastest-growing part of corporate debt, according to RBC Global Asset Management. “We are concerned about how the direct lending private credit space would deal with a higher-for-longer world,” said Andrzej Skiba, the firm’s head of US fixed income. “You’re much better off in public markets because the leverage profile, the interest coverage ratios are just so much better,” he tells Bloomberg News’ James Crombie and Bloomberg Intelligence senior credit analyst Mike Holland, in the latest Credit Edge podcast. Holland and Skiba also discuss value in financial-sector debt, technology and media bond opportunities, coercive liability management exercises and 2025 bond market returns.See omnystudio.com/listener for privacy information.