Private Market News: 10/6/23

While everyone else is focused on #SBF, Travis Kelce/Taylor Swift, and Capitol Hill, our eyes are on the growth in private credit and private equity secondaries! The big news this week? KKR sees private credit allocations becoming permanent, while PitchBook highlights retail investors becoming a bigger part of its growth. Plus, LPs and GPs are increasingly bullish on alts, says Goldman Sachs. Read on for more! ???

Be sure to subscribe to the Securitize Private Market News newsletter for insights like these every week!

Key Insights:

• Ongoing uncertainty about the Fed’s future stance and further signs of labor market resilience propelled yields higher again this week. The 10-year Treasury yield rose to as high as 4.80%, levels not seen in 16 years.
• UBS became the latest major bank to make a step toward mainstream tokenization adoption, announcing a pilot project to tokenize a money market fund on Ethereum under a Singaporean entity structure.
• With rising yields helping private credit returns, some fund managers are facing pressure to adjust the “hurdle rate” above which they can charge performance fees. There is even some discussion about switching to a “floating” hurdle rate benchmarked to central bank policy rates, so that managers are not rewarded for underlying rate hikes.

KKR sees permanence in shift to private credit

What you need to know: Investors are both increasing their allocations to private credit and signaling its a place they intend to stay, according to Christopher Sheldon, KKR’s co-head of credit and markets. Private credit will continue to grow as both an alternative and complement to traditional bank lending, he said.

Learn more: Individual investors can access private credit through securitize.io.

Sources: Bloomberg (Jill R Shah)

Private equity secondaries becoming attractive for institutional and individual investors

What you need to know: Big asset managers are increasing their exposure to private equity secondaries – that is, the ability to buy out others’ PE investments at a discount. The market reached $100 billion last year (double from 2017), according to Lazard.?

Learn more: Tokenization is now making it possible for individual investors to access private equity secondaries.

Sources: Financial Times (Will Louch, Harriet Agnew, Antoine Gara)

In hedge fund capital Greenwich, eyes are instead on private credit

What you need to know: Non-bank private credit lending could become a bigger driver of home, auto, and other loans historically provided by banks, Ken Kencel, CEO of Churchill Asset Management, said at the Greenwich Economic Forum. As banks consolidate and retreat from lending, non-bank lenders are filling the gap. “We are probably still in early innings,” said Jan Van Eck.

Learn more: Individual investors can participate in the private credit boom, including potential liquidity through monthly redemptions.

Sources: Business Insider (Bradley Sacks)

UBS launches tokenized money market fund

What you need to know: UBS Asset Management’s Singapore business is seeking to increase liquidity of fixed income products through a new money market fund tokenized on Ethereum, The Block reports.?

Learn more: This is consistent with a growing trend in using tokenization to expand access to–and the value of–fixed income products, such as through a money market product Tradeteq recently tokenized using Securitize on the XDC blockchain. As of May 2023, the tokenized treasuries market quadrupled since just January to $500 million.

Sources: The Block (Yogita Khatri) and CoinDesk (Krisztian Sandor)

LPs and GPs increasingly optimistic about private markets, says Goldman Sachs report

What you need to know: A Goldman Sachs survey of over 200 limited and general partners conducted in June/July indicated they are increasing allocations to alternative investments, with 64% anticipating the future would be better than the past. Investors felt they were under-allocated to some of the fastest growing asset classes, like private credit and private equity secondaries.

Learn more: What is private credit? We explain here.

Sources: Preqin (Nick Heath)

Retail investors becoming larger driver of private credit’s growth

What you need to know: Not only is the private credit market growing, but individual investors are becoming a bigger driver of its growth, PitchBook reports. Private debt fundraising is now second only to private equity, and has overtaken venture capital. With private credit growing by over $200 billion per year for the past four years, it will soon exceed $2 trillion in AUM.

Learn more: Private capital investing isn’t limited to big institutions. For example, Securitize is expanding individual investor access to private credit through a partnership with Hamilton Lane.

Sources: PitchBook (Tim Clarke)

Access the most exclusive asset class in the world: private markets.

Securitize is here to help you start investing in startup equity, funds, commodities, real estate, and more.

Our investment team is ready to help you achieve your financial goals.

Get in touch with our team today to learn more: https://securitize.pub/3rIlSa3