As some of the largest managers in the $1.5 trillion private credit market gathered for an industry conference in Beverly Hills this week, one question dominated discussions on and off stage: how to convince smaller investors to join in.
(Bloomberg) — As some of the largest managers in the $1.5 trillion private credit market gathered for an industry conference in Beverly Hills this week, one question dominated discussions on and off stage: how to convince smaller investors to join in.
For private credit managers, the issue is no longer a trivial one. As executives from Carlyle Group Inc. and HPS Investment Partners acknowledged during a panel discussion, gathering assets from insurance companies and retail investors will be key for the market to sustain its growth trajectory over the next several years.
“You’re gonna see more and different offerings for individual investors,” Justin Plouffe, Carlyle’s deputy chief investment officer for global credit, said during one of the panel discussions. “The institutional market will remain a core, but it’s not probably gonna be the growth.”
Preqin, a data research firm, expects the asset class to reach $2.3 trillion in size by 2027, up from about $500 billion in 2015. While many private managers have already forged partnerships with insurers and manage assets on their behalf, take-up in the retail market still has a long way to go.
It’s an issue that the conference host — CAIS Group — has been trying to solve for years with a platform that connects alternative asset managers to investment advisers for individuals. The firm has received backing from heavyweights including Blythe Masters’s Motive Partners, Todd Boehly’s Eldridge Industries as well as Apollo Global Management Inc. and Franklin Resources Inc.
“There’s a little bit of a race on all of our parts to be in front of you guys, to get you interested in our firms and what we’re doing,” Kipp deVeer, head of the credit group at Ares Management Corp., told the audience during a different panel discussion. “Flying around on planes and educating people is what we do and it does take time but we are in hustle mode doing that.”
Read more: KKR and Carlyle Take No Carry on New Private Credit Funds
The increase in popularity of business development companies — investment vehicles that raise equity from investors to buy slices of private loans — has made the asset class gradually more accessible to retail buyers, allowing managers to differentiate their sources of funding.
“I think you’re starting to see capital coming out of Asia and the Middle East that’s coming into those type of structures in a way that historically hadn’t before,” said Grishma Parekh, co-head of North America core senior lending at HPS. “The vast preponderance of new capital is gonna be coming from those two channels,” she said referring to retail and insurance investors.
Yet conversations with some of the hundreds of financial advisers that showed up for the event demonstrated the extent of the challenge the industry faces in breaking into the retail market. Walking the hallways of the Beverly Hilton, some advisers said they still know little about private credit, were concerned with its limited liquidity compared to public investments and that the asset class is still daunting to their clients.
“This is a combination of education, technology, feet on the street,” James Zelter, co-president of Apollo, said of the challenge to win over retail investors and their advisers. “It’s not going to be a bunch of quick wins.”
- Apollo and Goldman Sachs Asset Management are among firms working on a plan to provide a €4.5 billion loan to back a take-private bid for classifieds company Adevinta ASA
- The creators of South Park are in discussions with Carlyle Group Inc. for a private loan totaling around $800 million that would be used to refinance an existing credit facility and fund a cash payout
- Private credit lenders are in talks to provide around $2 billion of debt financing to support a potential buyout of CCC Intelligent Solutions Holdings Inc., a car-insurance software provider
- Strategic Retail Partners, a consulting firm that helps retailers analyze their data and distribute goods to their shelves, is working with Houlihan Lokey on options to refinance existing debt which may include a private credit loan
- Vivriti Asset Management Pvt. raised 17 billion rupees ($204 million) from its three private credit funds, joining a growing number of its Indian peers in tapping the booming market for direct lending
- Fidelity International has launched its first private lending fund with a loan to a Dutch dental services company
- US fund manager Muzinich & Co. has launched an Australian feeder fund to give local investors access to its European parallel lending debt strategy MLoan, according to a company statement
- Octagon Credit Investors is targeting a near-doubling of assets by exploring moves into private credit and expansion in Europe, according to its incoming chief executive Gretchen Lam
- Copenhagen Infrastructure Partners closed two new funds at a combined €2 billion ($2.1 billion) to plow money into producing clean fuels and financing renewable projects
- Nicola Wealth Management Ltd. tapped Robert Olsen as vice chair of its private capital team as the Canadian firm tries to build up a larger business in alternative assets
- HSBC Holdings Plc has hired Jasper Reiser from Credit Suisse to lead its equity private placements team in Europe, the Middle East and Africa
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–With assistance from Silas Brown.
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