There are signs the private credit market is getting too hot, with increasing questions around asset values and yields under pressure. But investors are not losing their appetite.
At the latest CFA Australian Investment Conference, the audience of fund managers and chartered advisors were asked what asset class was highest on their horizon. The top response — and an interesting story in itself — was emerging markets equities. But battling it out for second were perennial performer infrastructure and private credit.
Mason Stevens chief investment officer Jacqueline Fernley said the latter sector was very interesting but added that private credit fund manager selection was crucial: “Everyone is hanging out a shingle, so you have to be very, very careful.”
Australian Retirement Trust CIO Ian Patrick echoed the thoughts on manager due diligence but acknowledged, even with the pressure on yields, “spreads are still very attractive”. He warned, given the state of the cycle and the broader economy, it was critical to understand the underlying assets in a fund and, particularly given the relatively short history of the sector, gain some confidence in a manager’s ability to work through defaults.
