Institutional investors are showing faith in private credit even as retail money gets spooked, since default rates in portfolios remain low, according to Anthony Fobel, chief executive officer of Arcmont Asset Management.
Fobel, speaking at the SuperReturn annual gathering for private capital in Berlin, said it was fair to question whether the industry should be chasing retail investors for what is “essentially an illiquid asset class.” While that’s led to a wave of redemption requests, the mood in the industry was stronger than the picture reflected in recent news coverage, he said.
“What we are seeing indeed is almost directly the opposite of what we’re reading in the press,” Fobel said in a speech to kickoff the conference on Monday. “In fact what you’re actually seeing is contrary to there actually being any kind of negative performance in portfolios.”
The private capital industry is convening at an uncertain time, following warnings of a credit market downturn and some significant writedowns . Redemption requests that were previously contained to US private credit vehicles spilled over into Europe last week when Swiss private equity firm Partners Group Holding AG capped withdrawals at 5% in one of its funds.
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Institutionally Backed
Fobel, who founded Arcmont, said he’s been speaking to peers who run other private credit firms as well as institutional investors who have access to underlying performance data. He predicted that the private credit sector, currently worth $1.8 trillion, would be valued at €4 trillion ($4.6 trillion) by 2030.
The rush by investors to yank funds and subsequent caps on redemptions by some firms follow worries over the risks from AI’s impact on the sector’s heavy software holdings. That’s provoked soul searching among executives over whether more is yet to come, and is likely to spark plenty of debate at the week-long industry shindig.
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What’s often missed is that private credit is “overwhelmingly institutionally backed,” Fobel said. The conference audience, voting over an app during Fobel’s speech, said an end to geopolitical tensions in the Middle East would be the main driver for the sector moving forward.