Structured Credit
Delve into private credit securities tied to diverse sectors.
Such as Asset-Backed Securities, Collateralized Loan Obligations, and more.
Such as Asset-Backed Securities, Collateralized Loan Obligations, and more.
Private Credit : How To Benefit From Higher Rates?
Private Credit, now valued at $1.5 Tn, has seen rapid growth since the 2008 financial crisis when regulations re-shaped how and to whom banks lend. As banks' balance sheets decrease and deposits shift to higher-yielding funds, a financing gap has emerged.
Top Private Equity firms like Blackstone, Apollo, and KKR have stepped in to address this gap. We believe Private Credit represents a compelling opportunity to generate equity like returns for taking credit risk.
With the right knowledge and guidance, you can navigate the private credit investments landscape with confidence.
Top Private Equity firms like Blackstone, Apollo, and KKR have stepped in to address this gap. We believe Private Credit represents a compelling opportunity to generate equity like returns for taking credit risk.
With the right knowledge and guidance, you can navigate the private credit investments landscape with confidence.
as seen in:
2023: Start of the Private Credit Golden Era
Private credit accounts for ~12% of the global alternatives market, totaling $1.5 trillion AUM.
According to Preqin the AUM is growing at over ~11% CAGR and is continuing to grow as banks retreat amidst rising interest rates and pressure from regulators.
Leading Private Equity firms such as KKR, Apollo, and Blackstone and their peers predict a golden era for private credit.
According to Preqin the AUM is growing at over ~11% CAGR and is continuing to grow as banks retreat amidst rising interest rates and pressure from regulators.
Leading Private Equity firms such as KKR, Apollo, and Blackstone and their peers predict a golden era for private credit.
What’s fuelling this growth now?
The Challenges Banks Face are Fueling Private Credit Growth:
As per Bloomberg rising interest rates have led to a ~$1 trillion draw-down in deposits. Deposits are rotating out to higher yielding money market funds. This reduces the ability of banks to lend.
Capital Cost Challenges:
Fed rate hikes have exposed poorly structured deals such as short-term variable rate loans that cannot cope with the fastest pace of rate hikes since 1981.
This has resulted in cash flow disruptions, hung loans, and tight lending markets.Recent collapses of banks like SVB and Signature have prompted regulators to scrutinize bank lending standards and forced Banks to classify more assets as impaired.
This has reduced lending overall and certain sectors, such as commercial real estate, have been particularly challenged. This climate has put banks on the defensive.
As per Bloomberg rising interest rates have led to a ~$1 trillion draw-down in deposits. Deposits are rotating out to higher yielding money market funds. This reduces the ability of banks to lend.
Capital Cost Challenges:
Fed rate hikes have exposed poorly structured deals such as short-term variable rate loans that cannot cope with the fastest pace of rate hikes since 1981.
This has resulted in cash flow disruptions, hung loans, and tight lending markets.Recent collapses of banks like SVB and Signature have prompted regulators to scrutinize bank lending standards and forced Banks to classify more assets as impaired.
This has reduced lending overall and certain sectors, such as commercial real estate, have been particularly challenged. This climate has put banks on the defensive.
What does it mean for you?
We see today's lending climate mirroring Post-GFC years and believe that certain niche, private credit strategies may be able to generate 10-20% returns.
Market Prospects:
Inflation-induced margin compression expands opportunities for private lenders, with floating-rate debt poised to gain from rate hikes.
Fixed Income Alternative with Calculated Risks and Reward:
Amidst rising rates and bank lending constraints, well-structured fully-covenant loans, have better default recovery rates and risk adjusted returns.
Market Prospects:
Inflation-induced margin compression expands opportunities for private lenders, with floating-rate debt poised to gain from rate hikes.
Fixed Income Alternative with Calculated Risks and Reward:
Amidst rising rates and bank lending constraints, well-structured fully-covenant loans, have better default recovery rates and risk adjusted returns.
Not all Private credit is same
We Seek
Diversified risks, teams with proven success, and niche strategies with strong covenants.
We Avoid
Weak capital structures, ‘hot’ sectors like biotech lending, and syndicated loans.
Our Private Credit Investments Menu:
Corporate Credit
Engage with directly originated senior and subordinated credit.
This encompasses Opportunistic Credit, Distressed, Venture Debt, and more.
This encompasses Opportunistic Credit, Distressed, Venture Debt, and more.
Specialty Finance
Dive into directly originated credit.
Explore areas like Litigation Finance, Trade Finance, and more.
Explore areas like Litigation Finance, Trade Finance, and more.
The Lumida Advantage
Trusted Fiduciary
Lumida operates as a fiduciary, prioritizing our clients' interests above our own. We are not commission-based brokers; instead, we focus on understanding each client's unique situation to craft tailored investment strategies that align with their objectives.
Manager Selection
Lumida excels in identifying investment themes and sourcing adept managers to leverage them. Our rigorous diligence process is designed to find managers who have deep expertise, a proven success record, and a commitment to excellence. Qualified investors are welcome to access Lumida's comprehensive diligence reports.
Beyond the Ordinary
Lumida specializes in alternative investments, diving deep into opportunities often overlooked by traditional portfolios. Our focus extends beyond the mainstream, ensuring our clients benefit from diverse, high-potential assets.
Qualified Clients can click below to learn more:
OUR TEAM
Founder
Team
Sam Caspersen
Chief Compliance Officer
Marc Damiano
Client Associate
Diana Rybalko
Operational Support Specialist
Svitlana Romankevych
Researcher
Shikhar Gupta
Research Analyst to CIO