Private Market News - 12/8/23

The big news this week? Private credit is showing big numbers while changing the way companies borrow money, tokenization is on the rise, and a new private market fundraising report from PitchBook was released.?

Be sure to follow Securitize for private market insights like these every week!

Key Insights:

• Benchmark rates continued to move lower this week, with soft economic data, falling oil prices, and benign comments from Fed officials all feeding a narrative that the Fed hiking cycle is likely over, and that rate cuts could start sooner than expected in 2024. The 10-year Treasury yield traded as low as 4.10% this week, moving even farther from its highs of >5% in October.
• The 美国道富银行 Private Equity Index showed that private credit outperformed private equity in Q2 2023, and has done so in all quarters except for one since the beginning of 2022. Private credit has broadly benefitted from their variable rate exposure in a period of rising rates, while private equity has lagged behind due to higher borrowing costs and a weak M&A market.
• 彭博资讯 reported that Citizens Financial Group, Inc. is exploring partnerships with private credit fund managers and other third parties, in a sign that even smaller banks are exploring a push into the private credit asset class.

A Beginner’s Guide to Real-World Asset Tokenization

Real-world asset (RWA) tokenization is bringing change to how people can own and transfer assets in the physical and virtual worlds by acting as a bridge between both ‘realities.’

According to industry players, RWA tokenization’s market capitalization will surpass the $10 trillion mark by 2030. The opportunities presented by its growth explain the excitement surrounding it. Experts say that RWA tokenization will bridge traditional finance (TradFi) and Decentralized Finance (DeFi). Keep Reading

Further Reading: The ultimate guide to tokenized alternative assets

Sources: Unchained Crypto

Private Credit Is Giving Investors Better Returns Than Private Equity

Investors in private credit are currently getting better returns than they would from private equity, new data shows, piling even more pressure on a buyout industry that’s reeling from the evaporation of M&A this year.

The State Street Private Equity Index, which collects data from about 3,900 funds with $4.8 trillion in capital commitments, calculated that private debt funds returned 2.61% to their investors in the second quarter of 2023, the latest data available, while buyout funds returned 2.29%. Since the start of 2022, private credit has been ahead in all but one quarter, according to State Street’s numbers. Keep Reading

Further Reading: Get the skinny on private credit

Sources: Yahoo Finance 彭博资讯 Kat Hidalgo Francesca Veronesi Silas Brown

Real-World Assets Have Already Tokenized Hundreds of Millions

The world of finance and investment has undergone a significant transformation recently, thanks, in large part, to the growing tokenization of real-world assets (RWAs). In essence, tokenization refers to the process of issuing a digital representation of an asset on the blockchain.?

To put things into a financial perspective, the concept has garnered so much traction that, as of Q3 2023, the total value of tokenized real-world assets has already reached a whopping $2.75 billion. Not only that, a growing list of mainstream financial entities, including BNY Mellon, JP Morgan, and BlackRock, have either released their very own tokenization platforms or have at least recognized the efficiency aspect of these assets (from a payment and settlement perspective). Keep Reading

Further Reading: Tokenization can benefit long-term investors

Sources: Analytics Insight?

PitchBook’s Global Private Market Fundraising Report

There are clear winners and losers in the competition to raise capital for investing in the private markets. New capital for real assets and VC plummeted in the 12 months ending in Q3, while PE secondaries was the only strategy to raise more money, not less.?

In this less-than-generous environment, PitchBook’s latest Global Private Market Fundraising Report captures the story of which strategies are thriving and which are out of favor. Plus, their senior strategist has a message for GPs in the thick of raising new funds: Be patient. Keep Reading

Further Reading: Do you know the difference between private and public markets?

Sources: PitchBook

Private Credit Is Changing How Companies Borrow Money Forever

What do the auction house Sotheby's, the shapewear maker Spanx, and the company behind Fender guitars have in common? They've all borrowed money from firms that lend like banks, earn interest like banks, and work with clients like banks — but aren't banks.?

For a midsize company, going to private-equity firms and other money managers — also known as nonbanks, shadow banks, or alternative asset managers — is an increasingly common way to borrow cash.?

Traditional lenders, including Bank of America and Wells Fargo, have pulled back on issuing loans to companies since the Great Recession, when new regulations required banks to hold more capital on their balance sheets to guard against loan losses. But businesses will always need to borrow cash to run. Investment firms such as Blackstone, The Carlyle Group, Apollo Global Management, and Ares Capital Corp. have pushed aggressively into the private-debt market to take advantage of that need. Keep Reading

Sources: Business Insider Rebecca Ungarino