The private credit market is heading toward its most challenging period since 2008, amid risks from inflation and a potential recession, New York Life Investment Management CIO Jae Yoon told attendees at the SuperReturn Asia conference in Singapore, according to Bloomberg.
Yoon said that the market’s recent resilience, driven by fiscal stimulus and strong markets, may be running out of steam. “We’re about to come to a reckoning moment,” he said, according to Bloomberg, warning of a growing divide between well-managed credit players and those taking unnecessary risks, similar to what occurred during the 2008 financial crisis.
The private credit sector faces several threats, including extreme competition, looser lending standards, and declining recovery rates. Patrick Dennis, co-deputy managing partner at Davidson Kempner Capital Management, also flagged rising private credit defaults as a major market concern, Bloomberg reported.
While an "Armageddon" scenario is unlikely, Yoon said the flood of capital into private credit has created debt concentration risks, making diversification within the sector increasingly difficult.
Source: https://www.bloomberg.com/news/articles/2024-09-24/private-credit-faces-worst-reckoning-since-08-ny-life-cio-says
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