economy
Oaktree's Howard Marks says there's no systemic problem with private credit
Marks said any risk stems from the pace of expansion in direct lending, which has ballooned to a market now exceeding $1 trillion since inception around 2011.
TL;DR
- Howard Marks does not see a widespread systemic problem in private credit.
- The rapid expansion of private credit over the past 15 years could expose weaker lenders when markets turn.
- Direct lending has grown to over $1 trillion since around 2011.
- Sentiment towards direct lenders has soured following collapses of auto-related borrowers like Tricolor and First Brands.
- Concerns exist about loans made to software companies due to potential disruption from artificial intelligence.
- The saying 'the worst of loans are made in the best of times' applies, and the market downturn will reveal credit analysis quality.
- Investors have pulled money from Blackstone's flagship private credit fund, indicating growing caution.
- It is impossible to predict precisely when the economic cycle will turn.