Nice letter! I don't buy this whole "private credit" is in trouble thing. BDCs have $500b under management, so the $1b realized loss is 0.2%. Even if we annualize it, and assume things will be 10x worse, we are are at 8% write-off (vs ~10% un-levered yield). Yes, this means it would underperfrom, but I am seeing bears on substack saying private credit is in big trouble, which is a stretch in my view.
Nice letter! I don't buy this whole "private credit" is in trouble thing. BDCs have $500b under management, so the $1b realized loss is 0.2%. Even if we annualize it, and assume things will be 10x worse, we are are at 8% write-off (vs ~10% un-levered yield). Yes, this means it would underperfrom, but I am seeing bears on substack saying private credit is in big trouble, which is a stretch in my view.
Agreed. $1B on a $1.7T base is a borderline rounding error. Compare that to historic default rates in public high yield.
The marginal lenders will take losses and the major players will get bigger
Yeah. They were speaking about $1B in BDCs only (hence $500B figure), but agree.