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...“Public pension funds have for many years poured money into private equity on the premise that it was high-return and low-risk while illiquidity was deemed not to be an issue,” said Richard Ennis, co-founder...
...High-yield issuance has also accelerated, rising 64 per cent year-on-year to $62bn — the highest total in three years....
...The rise of high-yield bonds in the 1980s was another large wave, as were the various advances in securitisation, each enabling more borrowers to bypass banks....
...Unusually high temperatures have also hit production of coffee beans, providing another avenue for quant funds to profit....
...A boom in private-credit CLOs, for one, would create demand for more frequent liquidity than what’s available from most funds today....
...All-in yields remain very high for many—above the psychologically relevant 10% threshold....
...So asset managers who wanted to juice their fund’s yield often kept larger allocations to credit than existed in the benchmark (often the Bloomberg US Agg)....
...to, other forms of lending such as high-yield bonds,” we wrote....
...It would be odd for anyone to show that the average high- yield fund does not earn returns in excess of its risks, and think that they have proven anything useful. There is something to this....
...The IMF estimates the size of the global private credit industry at just over $2tn, most of which is in the US, rivalling the high yield and leveraged loan markets....
...And then there are the fund managers’ fees to take into account. These can be relatively high — an average of 3.94 per cent of total assets, according to the Cliffwater survey....
...So the all-in yields are still pretty high because the Fed rate is still pretty high. It’s at a 20-whatever-year high....
...High and volatile US treasury yields — which underpin pricing in financial markets — risk adding to global rate pressures....
...Pension funds are the biggest group of investors in the high-yield private credit market, driven by a desire to diversify away from government bonds, which have been hit in recent years by the prospect of...
...and transaction costs are high.”...
...The crowded corporate credit trade, part 2 Last week I looked at the boom in corporate credit and the accompanying tight credit spreads in high-yield and investment-grade bonds....
...High-yield credit quality is the best it’s been in many, many years. Half that market is double-B now; a decade ago it was only a third of the market....
...Markets are pricing in two quarter-point rate cuts by the Fed in 2024 from the current 23-year high and only a 50 per cent likelihood of a third, in a dramatic reversal from the start of the year when between...
...Is corporate credit too crowded? For a gestalt image, start with the Bank of America fund managers’ survey....
...Private pension funds constitute half of the UK institutional market and the rise in bond yields since the pandemic is now delivering a double whammy to managers’ revenues....
...In contrast, high-yield bonds returned 11 per cent, senior loans 10 per cent and convertible bonds, an equity-fixed income hybrid, also 10 per cent....
...It’s likely that Europe is in recession, or very close to it, and that has been the case since really the third quarter of this year,” said Mike Scott, head of global high-yield and credit opportunities...
...High yield at a yield of 8 per cent looks even better… Credit spreads of 95 basis points in investment grade corporates and 325 bps on high yield are towards the tighter end of their long-term ranges, but...
...A millennial former filmmaker and actor (his credits include The Wolf of Wall Street), he is also the son of a billionaire hedge fund manager — now a partner in his son’s thriving commercial property venture...
...Equities with high dividend yields deserve more attention. Grumpy bond market veterans occasionally refer to stocks simply as poor quality credits....
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