Michael Lukin: Yeah, I think private credit has been really the star
of the last 12-18 months. Eight to ten percent returns with very little risk on a cash basis and in such a heightened level of uncertainty has been a pretty good place to park capital.
And I think the continuing, increasing private markets and the increasing, relevance of non-bank kind of leverage into private equity deals, the opportunity set will continue to grow for private credit.
And what's been a relatively conservative market environment, that's actually great for private kind of credit investors. Because you don't have aggressive lenders out there charging lower yields, giving away more in terms of terms, giving away more in terms of covenants. So you've got the opportunity to really deploy capital at a good time in the market from a base rate perspective, but also from a margin perspective.
And then also what’s often overlooked is the terms in which are lending. So a tight covenant restrictions that give you confidence as a lender to these businesses, leverage not at levels that are eye watering given the higher serviceability cost. So all in all, you have this situation where private credit can actually be a really nice place to deploy capital where yields import and high single digit returns are your target.
I think we'll continue to see more and more capital deployed in that. And I think in some pretty attractive deals, as those bank deals start to get refinanced. Private equity's starting to do more deal activity, it's going to just generate more deal flow for the kind of private credit investors in the market.
