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Private Capital: Opportunities from Listed Market Turmoil

As listed credit markets seize up, private credit waits in the wings

For private markets funds, awash with around $3tn in committed capital, market dislocations can be a two-edged sword. For months, many Private Equity (PE) firms that have been reluctant to undertake deals because of high valuations, now find that most credit markets, particularly the high yield debt, syndicated and structured loans often used in PE deals, are effectively closed.

Private debt funds or 'middle-market' lenders may be better placed. Many companies now find themselves in a distressed state financially and need cash urgently, cash  that banks appear reluctant to lend, despite the tsunami of money that  global central banks have attempted to flood the financial system with. These papers outline some of the opportunities available in both private equity and debt markets, while highlighting the risks and different approaches to  valuation methodologies.

vultures in tree

Middle Market Direct Lending (Franklin Templeton, 2020)

For compliance reasons, this paper is only accessible in certain geographies

Franklin Templeton identifies and distinguishes between the two types of middle-market (or private credit) lending that exists and argues that both can play a role in a well-diversified portfolio.

Private Equity and the Leverage Myth (State Street, 2020)

State Street suggests a potential solution for the conundrum that faces private equity investors when attempting to value unlisted assets.

In Private Markets, Red is the New Black (Enterprising Investor blog, Feb 2020)

The author outlines the various valuation methodologies and approaches used by investors in private markets.

Private credit: Middle market opportunities to meet today’s challenges (Nuveen, 2020)

Nuveen identifies some of the challenges involved in being an investor in private credit markets and suggests potential solutions.

Podcast: Private Credit - Opportunities to generate alpha above public debt (JP Morgan AM, Feb 2020)

Jonathan Segal, Co-Chief Investment Officer of Highbridge Capital Management, discusses what effects low yields might have on private credit markets.

Coronavirus Casts Shadow Over Credit Outlook (S&P Global, Feb 2020)

This paper presents S&P Dow Jones Indices' early assumptions about the implications of the COVID-19 outbreak on both economies and the credit markets.

Equity Markets Fell, Are Angels Next? (Qontigo blog, 2020)

In this paper, Qontigo highlights the risks to the financial system from the 'fallen angels' in the corporate bond sector of the credit markets.

Podcast: Private Infrastructure and Debt - Concentrating on the core (JP Morgan AM, 2020)

JP Morgan's Infrastructure Investments Group discusses how to grasp the opportunity, while also managing risk, when investing in private equity investments in the infrastructure space.

Coronavirus Effects: Macroeconomic commentaries and scenarios (Moody's, 2020)

Moody's provides a range of material that assesses the implications of the COVID-19 outbreak.

Did private capital deliver? (MSCI blog, Jan 2020)

MSCI offers their thoughts on whether the boom years for private capital funds did actually deliver for investors.

How Private Equity Can Capture the Upside in a Downturn (BCG, 2019)

In this paper, Boston Consulting Group explores whether private equity can offer investors good returns when the economic outlook becomes more turbulent.

Risk Framework: Fitting Private Equity into Investment Portfolios (State Street, 2020)

State Street offers its framework for estimating systemic and idiosyncratic risk in private equity programs.