Interesting. New assumptions are nice, and we all know how horrible anyone and everyone is about predicting the future. I imagine asumptions not based upon evidence based research are at best a flip of the coin or wrose guesses. Where is the peer reviewed studies on convergence effects in ANY debt market?
Great read! It really highlights a core dilemma for allocators: there’s no single, reliable source of truth one can use.
Right now, the landscape looks something like this:
1. Over-sensationalized media coverage that treats any default in a trillion-dollar asset class focused on higher-risk lending as if it signals systemic collapse.
2. Manager marketing materials that, unsurprisingly, present everything as performing exceptionally well. While I find Cliffwater’s data and index valuable, there’s an inherent conflict of interest given their fund offerings.
3. 10-Qs and 10-Ks that lack full transparency and consistency across funds, making apples-to-apples comparisons difficult.
4. Third-party data providers like PitchBook and others, which may be more objective than managers but still have incentives aligned with the alternatives ecosystem.
5. External research reports from Banks and Rating Agencies that vary widely—depending on the source and the definition of private credit, default rates today are said to be anywhere from 1% to 8%.
6. "Third-party" due diligence reports from platforms like iCapital and CAIS that are incentivized to have people invest in alternatives. I'll include Mercer and others in this that don't do any fund accounting in their analysis.
The silver lining is that this level of ambiguity means some of us may remain employed for a few more years....at least until AI figures it all out...
Fully agree, there is significant stress under the hood as USD debasement continues guided by Fiscal Dominance.
Interesting. New assumptions are nice, and we all know how horrible anyone and everyone is about predicting the future. I imagine asumptions not based upon evidence based research are at best a flip of the coin or wrose guesses. Where is the peer reviewed studies on convergence effects in ANY debt market?
Excellent but gentle rebuke of these private credit myths that may have been true at one point but not anymore.
Great read! It really highlights a core dilemma for allocators: there’s no single, reliable source of truth one can use.
Right now, the landscape looks something like this:
1. Over-sensationalized media coverage that treats any default in a trillion-dollar asset class focused on higher-risk lending as if it signals systemic collapse.
2. Manager marketing materials that, unsurprisingly, present everything as performing exceptionally well. While I find Cliffwater’s data and index valuable, there’s an inherent conflict of interest given their fund offerings.
3. 10-Qs and 10-Ks that lack full transparency and consistency across funds, making apples-to-apples comparisons difficult.
4. Third-party data providers like PitchBook and others, which may be more objective than managers but still have incentives aligned with the alternatives ecosystem.
5. External research reports from Banks and Rating Agencies that vary widely—depending on the source and the definition of private credit, default rates today are said to be anywhere from 1% to 8%.
6. "Third-party" due diligence reports from platforms like iCapital and CAIS that are incentivized to have people invest in alternatives. I'll include Mercer and others in this that don't do any fund accounting in their analysis.
The silver lining is that this level of ambiguity means some of us may remain employed for a few more years....at least until AI figures it all out...