Private Market News: 10/13/23

The big news this week? Tokenization in the financial sector may be (finally) having its day, private credit is the new king of Wall Street, and private equity could be the key to investing for the next decade. Read on for more! ????

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Key Insights

• The rate markets remained highly volatile this week, balancing dovish-leaning comments from Fed policymakers with a hotter-than-expected inflation report. The 10-year Treasury yield remains close to last week's highs at around 4.70%.
• JPMorgan and Barclays executed a derivatives transaction collateralized by a tokenized money-market fund. The transaction allowed for near-instantaneous settlement and high transparency. It also reflected the potential composability benefits of tokenized assets, allowing for previously "idle" holdings to be actively used as collateral.
• Bloomberg reported that KKR and Carlyle have both launched direct lending funds that charge no performance fee ("carry"). The vehicles are both evergreen structures and were launched in Europe. The announcement comes amid a wider debate about whether private credit funds should change how they charge for carry, as the hurdle rates for charging carry have become easier to attain for managers given the rising rate environment.

The time for broad adoption of tokenization across the financial sector is now

The News: With an emergence of a “blockchain, not crypto” narrative, financial institutions are increasing their interest in tokenization and its ability to give them access to blockchain’s potential benefits, including improved capital efficiency; democratization of access; operational cost savings; enhanced compliance, auditability, and transparency; and cheaper and more nimble infrastructure.

Value Add: Learn more about blockchain and tokenization.

Sources: McKinsey & Company (Anutosh Banerjee, Ian De Bode, Matthieu de Vergnes, Matt Higginson, Julian Sevillano)

Big banks are targeting individual investors with private market funds

The News: According to Bain & Co., “individual investors hold roughly 50% of the estimated $275-$295 trillion of global assets under management,” but represent only 16% of the assets allocated to alternative investments. JPMorgan Private Market Fund is the latest entry to the growing open private equity market competition.

Value Add: Learn more about private markets.

Sources: The Wall Street Journal (Isaac Taylor)

Private credit is the new bank loan, leading to more opportunities for businesses, investors

The News: According to Preqin, “private-credit assets under management globally rose to about $1.5 trillion in 2022 from $726 billion in 2018.” Companies are turning to private lenders to pay off large bank loans, creating new opportunities for investors to explore this growing industry as private-credit investors may fare better than bank-loan holders in the long term due to better covenants.

Value Add: Explore available private credit and private equity funds.

Sources: The Wall Street Journal (Matt Wirz)

Assets like REITs and illiquid alternative investments are the focus for investing for the next decade

The News: As markets continue to shift and inflation is likely to remain high, investment advisors and wealth managers are recommending a global approach to investing for the next decade. Investing in private equity, REITs, commodities, and alternative investments could have a significant impact on portfolio performance over the next ten years.?

Value Add: Learn more about investing in private equity funds.?

Sources: CNBC (Ganesh Rao)

Private credit gives big boost to US economy

The News: According to a new report by the American Investment Council, the private credit industry has seen rapid growth, with more companies opting for private credit due to speed, more flexible covenants, and a stable relationship with lenders holding loans until maturity. Because of this, private credit supported an estimated 1.6 million jobs in 2022, yielding $137 billion in wages and benefits, and generating $224 billion in GDP.?

Value Add: See if the private credit market is right for your investment portfolio.?

Sources: AlphaWeek (Greg Winterton)

Sources cited this week: 麦肯锡 , Anutosh Banerjee , Ian De Bode , Matthieu de Vergnes , Matthew Higginson , Julian Sevillano , CNBC , Ganesh Rao, The Wall Street Journal , Matt Wirz , Isaac Taylor , AlphaWeek Greg Winterton