What's Actually Going On With Private Credit

17:28Craig Manchuck:So there was a massive desire for yield and better performing assets than they had in the early parts of the 2000s in the equity market. So that really led to the proliferation of the amount of dollars flowing into the product. And then on the supply side, we touched on it earlier, these highly levered borrowers were basically shut out of the banking lending market. So they needed to find alternatives to fund their businesses and to refinance their debt. So those two kind of came together at the same time and really fueled the growth of the product.

18:04John Sheehan:I think institutionally you had in the LBO world, sponsors were looking to have a real partner that they could go to repeatedly for all different types of transactions, go back to them again and again and develop a real relationship and where their lender could be very expedient as well. And I think expediency mattered in providing with sort of that guaranteed financing, which the banks were providing up until they were squeezed out from a regulatory standpoint on the most highly leveraged transactions. So I think that's what it really kind of comes down to is the ability to provide more leverage than the banks were allowed to without running afoul of the regulators.

18:47John Sheehan:So one thing that comes up regularly on the podcast is the sort of natural synergy between private credit and insurance. And insurance companies, they have all these assets and they have this advantage that they know exactly when those assets will be withdrawn. It'll probably be in like 40 years from now. They do not have to worry at all about a quick run, whatever. And so they can harvest that illiquidity premium. They could put their money into assets that do not trade very much. And that's very intuitive to me. Talk to us, though. You're operating an unconstrained fund that is a publicly traded 40-act mutual fund.

19:30John Sheehan:Talk to us about what it means. You say you look for opportunity. why are there private credit assets that aren't all locked up in these long-term vehicles? Why does it sometimes make sense for private credit assets to be in a vehicle that is just sort of more opportunistic and has a daily quote potentially? We currently actually right now don't have any private credit. We were involved in it in the past, but I think most of those opportunities have gone to the dedicated private credit funds because there's one of the structural differences of the way they're set up versus the way we're set up is we source our ideas mostly from investment banks.

20:15John Sheehan:Now, some of those investment banks used to come to us with transactions that weren't going to fly in the public market. So they would look and say, this is a small deal. We're not going to be able to find buyers from this among our investors who are primarily benchmark high yield investors because it would be outside the index and it would be illiquid. And there's been a lot of talk about problems with investing in illiquid securities. One of the real benefits of our strategy is we always have lots of liquidity. We have historically managed our portfolio in a short duration with a short duration focus that creates cash and we keep a lot of front end ballast.

20:55John Sheehan:So as our portfolio is always creating cash, we could invest in some pockets of less liquid strategies, but we haven't done that. The private credit guys are set up differently. They need a team of bankers to go out and source all their deals. They have to knock on company's doors. It's a very different way in their function of having to source their transactions to try to fill up the asset side of their portfolios. So because of that, over time, I think there's a huge structural difference between the way they approach it and the way we approach it. But just going back briefly to the insurance company side, insurance companies have long been investors in private assets.

21:33John Sheehan:And they used to have large teams of private debt investors. And ultimately, over time, what they've done is they've shrunken those teams and just said, here, you guys source the transactions for us, and then we'll give you guys the money, and you can go do it yourselves sort of on an outsourced basis. So naturally, it is a very good fit for them because they do have long-duration assets, and there's generally not a rush for those assets.

22:00Craig Manchuck:Could you say a little bit more about how competitive it's been in the past to source private credit deals if you're on the investor side. We hear these stories about, you know, basically private companies can kind of dictate the terms of the deals because there's so much overwhelming investor demand and you get this vision of people like literally pounding down the door to get in on a particular loan. Was that accurate in the past? No, I think even the managers of private credit would tell you in honesty, maybe not on the record, that they're surprised how quickly this has grown. So if you look at some of these funds that have grown 10x over the last five, 10 years, I don't think that they have grown their sourcing abilities by five to 10x.

22:46Craig Manchuck:So if you contrast it to say private equity, the way a private equity fund works is they find the investment opportunity and then they go call the funds from their LPs. Private credit, most of these funds work where they've taken the money first and then they go out and find the investments. So they are under much more pressure to find investments, which creates this competitive environment that you alluded to. Some of the issuers that we talked to that may have been in the public markets in the past tell us that when they go to the private credit market, it's just a competition for who will jump the highest for the piece of meat.

23:22And what that translates to in the credit world is either lower interest rate,

23:27Craig Manchuck:weaker covenants or a combination of the both. And that's really what you've seen with private credit in this hyper-competitive environment that we're in now.

23:36John Sheehan:One other thing that John mentioned, which is actually really important here. So the structural side, this is the liability side of the balance sheet for private credit guys is kind of critically important here. So if you're out there and you're raising an institutional fund, those institutional funds are generally drawdown funds. So they're allowed to go out, market and say, okay, we've raised commitments for five or$10 billion. We're going to go out now and source our investments, which is the asset side. The LP commitments are the liability side. So they will take on those liabilities as they find the assets and they end up being matched.

24:15John Sheehan:And this is in a structure that's typically got a term and it's locked up money that they will not be providing liquidity for those institutional investors. The problem, and this is where we've run into the big problems, and this is what is really circulating in and around the media, is more recently when we've gone and taken this out into these private BDC structures to market them to the retail or private wealth world, in order to raise the money, they've needed to offer some concessions on the liquidity, right because it makes it easier to raise money if you're going to allow people or you tell them that you're going to allow them to redeem at least somewhat periodically that has allowed them to raise money really fast it's a little bit piggy because they've just said okay we can raise a lot of money let's just raise the money when we can the difference is when those dollars come in they come into the fund on a subscription basis and need to be invested quickly and that's what's really created a lot of the problems and what's really led to the degradation of credit underwriting.

25:22Because if you don't invest those dollars quickly, it creates the lag on performance in the fund.

25:28John Sheehan:The minute that dollar comes in, it's part of your NAV. Therefore, it needs to be invested rapidly in an income earning investment. So that's what's happened. And you really saw a huge proliferation of this. I mean, one of the most obvious and visible of these you could see on there would be the Cliffwater Corporate Lending Fund, which is CCLFX on your Bloomberg. If you look that up, you can look at the asset growth in that. And it really has taken off in the last five years. In 2022, we would speak to our wealth management advisors who are investors in our fund and ask them about what's working for them.

26:04John Sheehan:Because in 2022, rates are going up. Investment grade bond funds are trading off sharply because people didn't understand the duration risk that they were carrying. High yield funds were weaker, but nowhere near as bad as IG. And I'd say, what's working? They said, oh gosh, private credit's been working great. I would say, well, that's wonderful, but that's because they're not taking their marks. And so they became very, very comfortable because they didn't have to turn around, talk to their existing investors and say, here, you lost a lot of money in this fund. It looks like you've just earned your yield and And your NAV has been very, very stable.

26:40John Sheehan:So as a result, their clients were happy. They were happy. What happened? Money poured in. So as that money poured in, it led to, I think, more bad actors is too strong or, but really more bad underwriting, weaker underwriting, more aggressive underwriting because they needed to get that money put to work. So they would provide more leverage at weaker terms. Just can you clarify – sorry, I think you explained it, but why is it that with the traditional private asset – not private – private asset model that they only call on the capital once it's needed? Because what you explained is, okay, once you take in the capital, if it's not being invested, it's a drag on NAV.

27:22John Sheehan:Very intuitive. Just explain, why is the other parts of the private capital world able to do the thing where you only call up the LPs when you have a deal, whereas that's not the case with private credit where you're taking the money up front? I just think it's what people are used to and they've gotten used to in that model over the years as an institution. Hey, I'll commit to your fund. Tell me when you need the money and we'll send it in. And I think that's the way they do it. Now, exactly how they do it. Yeah, I don't know if that's a dollar for dollar thing or if they'll do it in just installments over time, but it does help to provide.

27:59John Sheehan:It gives them the ability to have less drag by having you go out and raise a five billion dollar fund day one. That money is going to sit there. No, no. I mean, it makes sense. I guess what I'm trying to establish is why couldn't private credit work the same way where it's like, OK, I go out and raise five billion dollars worth of commitment. And then as I get a lending opportunity, then I call up my LPs and say, okay, you needed to pony up that$50 million to us that you've committed and whatever. Why couldn't it work that way?

28:32Craig Manchuck:It could. I think it's the nature of the investment. So the traditional structure that Craig described is private equity, right? So if you think about an equity investment, you go out, you buy a company, you take over management, retool operations, you merge, you do whatever you do in private equity to increase value. And then in three, five years, you want to turn around and realize that investment. Where a lending business is more of a kind of balance sheet perpetual business where you're finding new loans all the time and you have loans maturing, redeploying the money. So the evergreen structure of an integral fund makes more sense.

29:12Craig Manchuck:That makes sense. Yeah. So you typically have bigger bite sizes in private equity. It's a more heavily concentrated portfolio with a finite time frame. Whereas credit, it's like if you think of bank balance, this was funding that used to be funded by deposits in perpetuity.

29:31John Sheehan:I think the fact you have a much smaller number of investments, many, many smaller. I mean, a typical private equity fund can have five to 25 investments depending on its size, whereas the typical private credit fund is going to have hundreds, if not thousands. So imagine having to make the call$50 four times a week from your investor, each of your hundreds of thousands of it would be really cumbersome.

30:00Craig Manchuck:And I think that also goes to the logic around the gates. That's been a pretty controversial topic. But think about a five-year loan, right? You probably have 20 % of your loans come and due every year. That's 5 % a quarter. So the gates were put in there to address the fact that we have maturities every quarter that could be there to meet redemption. That's where some of the 5 % logic came from.

30:41Craig Manchuck:On June 10th, Bloomberg Invest is back in Hong Kong. We look at the role Hong Kong plays between China and the world as major powers compete and markets realign. As global investors rethink risk, we'll explore the forces driving Asian demand and the future of private capital. Catch exclusive interviews with top newsmakers, plus a live recording of Bloomberg's Odd Lots podcast. Visit BloombergLive.com forward slash InvestHongKong to learn more. Supporting sponsor Deutsche Bank. Actually, we should talk about the gates because one of the sort of defenses that you sometimes hear about private credit is this idea that, well, even if you get a spike in defaults and all these companies start failing, it's not necessarily a huge problem for private credit because we've set up these limitations on redemption.

31:32Craig Manchuck:So you can't get this rapid run for the exit because the amount of money that can be taken out of each fund is capped at, you know, 5 % or something like that. My inclination when I hear stuff like that is to think like, OK, well, you've capped the amount of money that can exit the fund, but that doesn't mean that you've stopped people from wanting to exit the fund. It's just a slower run than it would be otherwise. So you're sort of building up that pressure. But then again, the response to that is, well, you know, you're giving investors time to see their marks build back up or whatever. But like, does that selling pressure go away at all?

32:12Craig Manchuck:How helpful are the gates when it comes to managing stress in private credit?

32:16John Sheehan:I think they're critical, actually, in the retail channel because you're protecting both sets of investors. It's not the asset side of the equation. It's not the loans that they're making that are the problem. It's the other side. So if you go back and just think about what happened at First Republic Bank, they were owning treasuries and they had$40 billion of redemption requests for their demand deposits go out the door in a few days and the business was sunk. So if you didn't have the gates up and you had to run on the private credit funds because people were unhappy, they got nervous, they got scared, you sink funds very, very easily that way.

32:57John Sheehan:But what's important about it, and this is where we're going to get into a potentially thorny period as we move down the road, is these funds will either need to do one of two things. They'll either need to sell assets to meet their redemptions or they'll have to finance the redemption requests, provided that the inflows that they've been seeing slow down. Now, I think because of all the noise out there that we see in the media, people's confidence in the private credit space, certainly the retail investors' confidence, the wealth managers' confidence has been shaken. So it wouldn't surprise me at all if we see those flows slow down.

33:41John Sheehan:If that happens, then the net outflows will be potentially greater and they'll build. That means that these private credit managers will have to finance those or they'll have to sell assets. And the assets they sell are the ones that are probably the easiest to sell, which generally are the highest quality. So the concern here and really where when people are worried about the contagion, the concern is you are left with a fund that has raised more debt to meet some redemptions, then been forced to redeem to sell more positions. And some of those are your better positions. So now you've got a more levered fund with poorer overall investment quality.

34:27John Sheehan:Where does that stop? And at what point does that potentially blow up? Because candidly, the private credit guys may sell. The early sales there were from, we heard from Blue Owl into an insurance company. Okay, that's great. But I'll argue that we're just seeing the beginnings of the pools of assets being created that are going to take on some of the stressed or distressed loans in that space. And those loans are not going to be as easy to move, but you'll find somebody like an oak tree who typically does this at points of stress or distress, they'll go to their LPs and say, hey, we have a great opportunity.

35:09John Sheehan:We want to raise$10 billion. And because over the years, they've been really, really savvy about that, they're able to raise that money. So they'll create a special opportunities fund to go out and buy these particular private credit loans that are stressed or distressed. You need the expertise to go in and work out those loans and potentially either take and run the company from an equity standpoint or kick the can down the road and hopefully restructure and revise those loans. So I think that's where it really starts to get thorny. If we get into a protracted redemption cycle, the financing runs out and they have to start selling things.

35:46John Sheehan:It starts to really cut into the bone.

35:48Craig Manchuck:We do have a precedent for how the gates of interval funds have behaved over time. So if you go back to the commercial real estate market, after Silicon Valley Bank and First Republic Bank, everyone was trying to pull their money out of large real estate interval funds. There's one famously that hit the gates and prevented redemptions. That fund now has kind of gotten to the other side. It actually had a better return than its credit fund last year. And people tend not to panic for longer than three, six months, right? Human nature, crisis is a day, a week, a month. But if it just stays there long enough, people tend to get cooler heads and it works itself out.

36:35Craig Manchuck:But as Craig said, that'll help on the liability management side of these fund structures. It's not going to help on the asset side. So if the default rates start hitting some of these levels that people fear and or predict, it's not going to save you on the asset side of the equation. And then maybe to open up another topic, there's two parts of a default, right? There's when the company actually declares default and then what the creditors recover in bankruptcy. I think there's big fears around some of these recovery values that will be seen. Some of these are very highly levered companies with very few hard assets.

37:13Craig Manchuck:So that's going to be the next test when we start getting it to work out of some of these loans. What do the creditors really have to protect them in bankruptcy?

37:21John Sheehan:I'm glad you said this because this is a perfect seg into the question I was going to go to next, which is, OK, we trace the history of private credit to physical things, the type of things that a GE would sell, maybe like a wind turbine or natural gas turbine, whatever it is, et cetera. And we were talking about the big megatrends of the 2010s, and one of them was the regulatory push of loans off banks. Another one was Zerb. But another one was the emergence of these predictable payment streams called software-as-a-service subscriptions. This is the area in which you could really have zeros. A natural gas turbine is going to be worth something at the end.

38:01John Sheehan:An obsolete software company is not going to be worth anything if the business has been destroyed thanks to AI. But what was the moment in which the credit guys suddenly realized that essentially here is this business that we used to never think of high tech? It used to be when I was a kid, tech and debt didn't go together. What was the moment that the credit guys sort of realized that these are financeable assets, so to speak, that could come into the debt world? Joe, you hit the nail on the head here because this is the spot where really the high yield market and the private credit market started to diverge the most.

38:40John Sheehan:There have been issuers in the tech space and in the software space into high yield, but it's definitely been a more recent phenomenon. If you go back 10 years, there were not a lot of software issuers in the high yield space, largely because of that, because people couldn't get their arms around. The typical, okay, I need to have two times asset coverage or two and a half times asset coverage. We just never saw that. So those companies finance themselves either in the equity market or they finance themselves in the convertible bond market. So we used to see a lot of that in the convertible bond market because these are growth companies.

39:15John Sheehan:And so the convert market would say, okay, I'll accept a low coupon because I'm going to have equity participation on the upside. And so my upside isn't capped at whatever my coupon is. And I think that that's actually really been the area where it's diverged the most. How exactly did we get here? I think it was a willingness of these sponsors to come in and say, all right, I'm going to pay 16 or 17 times enterprise value to EBITDA for this business. And I'm going to put in an unusually large check. Let's say 40 % of that I will put in in equity instead of the typical 20%. So historically, people have in the LBO space, they were coming to the high yield market saying, we'll put 20 % down, finance the other 80%.

40:03John Sheehan:If they go to the private credit guys and say, well, we'll put 40 % down if you'll lend to us on the balance. We love this business at 16 times. And I think they potentially persuaded a lot of these lenders to get a little bit too far out over their skis in terms of the amount of leverage that they were willing to extend. And as a private credit lender, if it's just you or if it's just you and one other, you can be a lot more creative in terms of structure. And I think they also took on this willingness to say, OK, well, you can't afford to pay me this interest. So how about if we pick it? Because if we pick it, my my investment will grow and it'll give me sort of a quasi equity like feel because it's getting bigger.

40:46John Sheehan:So that's kind of intriguing to me, too. So I think there was a little bit of lender overzealousness. I think there was a competitive pressure. I think that they fell prey to some of the sponsors' willingness to overpay for some of these businesses.

41:05Craig Manchuck:So when I hear secured credit that might not have that much security behind it, as we just discussed with the example of the software companies, and then when I hear increasing amounts of leverage on the issuer side, but also on the fund side, because you have private credit funds that use leverage to increase their returns. And then when I hear illiquidity mismatches between, you know, a publicly traded BDC and the underlying assets, all of those sound very familiar from financial crisis history and have certain, you know, negative connotations around them. How worried should we be about the future of private credit at this point and the idea that is it going to be a systemic issue for the financial system?

41:50Craig Manchuck:I think the liability structure that we've discussed numerous times is dramatically different than what we saw in the financial crisis. So most financial institutions that fail, fail because of their liability structure. They're built to realize losses over extended periods of time, which I think many of these credit funds will be able to do. But I do think that we are going to enter into a period where we're going to see significant dispersion among credit fund managers or private credit managers. We've been lulled into uniformity of returns, right? If you look in the public markets, there's been a huge trend towards indexation.

42:32Craig Manchuck:So most people own SPY or QQQ or whatever form you want to pick. So equity returns all look very similar. And that's what happened in the early days of private credit, where everything was marked to par. You had an 8%, 9%, 10 % coupon. It looked great. So you couldn't really see some of the cracks below the surface. As Craig alluded to earlier, there have been managers who've been doing this for 25, 30 years, and there are very new recent entrants into it who've seen substantial growth in their assets that they had to invest. So I think that's probably the first leg that we'll see is that you're going to start to see real dispersion of returns from manager to manager.

43:12Craig Manchuck:But they have a good head start where they have coupons and they have returns built in that they can absorb higher default rates than they are now. It's just a question of how high do those default rates get relative to the coupons that they're earning.

43:27John Sheehan:And we've heard some numbers from some of the sell side Wall Street analysts that suggest that we could see 15 % defaults in private credit. Seems a little high, but it's not so far out of the realm of possibility because we've just seen the practice of extending more leverage to companies that probably shouldn't have that much leverage on. Many, many years ago, a good friend of mine who was doing this for a long, long time told me, company gets to six times levered. It's very, very difficult to get out from under that. And this is back in the early 2000s. We were in a normal rate environment.

44:05John Sheehan:That went by the wayside when we went through this period of extraordinarily low rates for many, many years post-financial crisis. But now that we're back where we are today, we're back into that environment where six, seven times leverage all of a sudden at the current borrowing rates becomes a real strain on most companies' balance sheets. So again, Again, if you think about the legacy businesses, some of these software companies that were in these portfolios, they might be 2020 or 2021 vintage LBOs that haven't monetized yet. They were borrowing versus an historically low treasury rate. Once we raised rates in 2022, all of a sudden the resets on these loans because they are floating rate have gone up.

44:48John Sheehan:So it's chewing into the equity value of these businesses and it's putting an increasing amount of strain on the companies to have to cover their interest expenses. So I think that all these things filter into more and more pressure on these companies, which could lead us to a spot where we do get to 15 percent of dollars. I'm not saying that the probability is very, very high, but if it happened, I wouldn't be shocked.

45:16Craig Manchuck:And can I just ask, you said earlier that you don't have any private credit exposure in your fund at the moment. Is that right? That's correct. OK. What made you take that decision? Because you said you'd been involved a little bit earlier. And then secondly, what would you need to see in the market to potentially get back in?

45:35John Sheehan:I think the reason that we don't is because we were financed out over time. And it was never a core part of what we did. It was a more ancillary part of our business. There were a few individual opportunities that came along with companies that needed money for a particular reason, or it was a business that people, I don't think, widely understood, or it was the size of the borrowing requirement. One of the companies took the money that we lent them and kept the money on their balance sheet the whole time. They just had it as a safety net. It was less than one and a half times levered for the entire time.

46:09John Sheehan:They no longer needed it. They paid us off and moved on and went to the next thing. So other times we were financed out by the leveraged loan market or the private credit market where they were going to be much more aggressive on the terms than the ones that we were willing to provide. And that's typically, we're a bunch of old guys and we have our ways of doing things that have been developed over 30 or 40 years. we're not likely to change our approach to providing credit just because the market now all of a sudden wants to get more aggressive and look past some of the obvious things, particularly as it comes to structure and covenant protections and amounts of leverage.

46:51We look at the business and say, okay, this business is worth seven times.

46:55John Sheehan:I'm not going to give them six and a half times leverage to do something. It just doesn't make sense.

47:00Craig Manchuck:And if you go back to the point you made to begin the podcast, how private credit and the proliferation of the loan market has impacted the high yield investment grade market, what was once a two-tiered market of investment grade, non-investment grade, has really become a four-tier market. investment grade, high yield, leveraged loans, private credit, in that order of credit quality, most of the credits that do not meet our underwriting standards have fallen into leveraged loan and private credit. So the high yield market is substantially higher quality now than it was before. The double B portion of the market is approaching 60%.

47:41Craig Manchuck:That used to be about 35%. And the riskiest segment, the triple C's, is now about 9%. That used to be over 20%. So just by our underwriting process, we kick out a lot of the highly levered companies, kick out a lot of the companies that do not have the interest coverage that we're looking for. And so it's a function of our underwriting process, but also where the more risky companies are financing themselves these days. All right. Well, I think we could talk about this even more. Yeah. We're going to have to leave it there. John and Craig, thank you so much for coming on All Thoughts. Really appreciate it.

48:16John Sheehan:Thanks so much. Nice being with you. That was great. Thank you so much.

48:31Craig Manchuck:So, Joe, I found that conversation super helpful just to sort of, again, contextualize private credit in the history of the bond market. I do think setting aside whether or not this is like a systemic issue. And I do I do think like we're probably not even close to 2008 crisis. Right. Like it just can't be. But there are probably some hidden issues within there that are like going to start to appear. But setting all of that aside, I think one of the challenges of private credit having these continued crises or at least being in the headlines all the time is it is going to have a macroeconomic impact.

49:09Craig Manchuck:Sure. If you think of it as this market that is now bigger than the junk bond market, like the junk bond market is an important source of financing for companies all around America. And so is private credit. So if you start to see that particular asset class slow down, like at a minimum, that's basically a credit crunch for a bunch of companies.

49:28John Sheehan:Totally. And you can see how there's this path dependency. And again, that doesn't mean it has to be systemic, but you can see how there's this path dependency where, as you mentioned, you get the headlines about withdrawals. There are more withdrawals. These sponsors have to sell good assets. They might have to take on credit borrowing of their own in order to meet those redemptions and so forth. You can see how that really spirals. I just really like how well they situated the whole conversation.

49:57Craig Manchuck:Their situationship. Their situation, Jim.

49:58John Sheehan:The way they could situate in the history of credit. Look, if we're talking about GE credit, financing, jet engine deals, et cetera, that's private credit. It's expanded beyond that. But it's basically all sort of versions, various flavors of a kind of financing that is quite old and non-exotic at all.

50:21Craig Manchuck:Absolutely. But I do think the sequencing also matters when it comes to raising money, because as they pointed out this idea that like you're going to start a fund and you immediately have to start like going out and sourcing stuff to buy with that money. And it puts pressure on you to get like what you can get.

50:36John Sheehan:That was very interesting. The difference between fund structure of a private equity fund versus a private credit fund, which I had never really thought of. Right. So VC and PE are like hunting around for deals and so forth. that are like, all right, we got a deal. Then you call up all the LPs who give you commitments and say, wire us that cash that you promised to now. Whereas in the financing realm, you just always have the cash on hand. It's always coming in and out. And the coming in and out part also clarifies something for me, which is that unlike with, say, a VC investment or a PE investment, where you put the money in and it's sort of indeterminate when you get the money back, You don't know when the company is going to IPO.

51:19John Sheehan:You don't know it's going to sell, etc. With lending, you do have that schedule from day one of when the money is supposed to come back in. And therefore, the idea of gates and redemption schedules in the first place makes more sense because when you have this sort of pre-understood timing of when the money comes back in, you can understand why you have a mechanism in place to schedule and regulate when the money is allowed to go back out to the LPs.

51:45Craig Manchuck:Right, but you still need to get back to some form of normalcy at some point.

51:50John Sheehan:Yeah, yeah, yeah.

51:50Craig Manchuck:But it's obviously incredibly helpful.

51:52John Sheehan:Well, and this gets to a thing I've wondered about, which is like, well, okay, as part of the issue here with some of the more retail-oriented private credit, which is education or lack of sophistication where you have entities putting money into private credit that hadn't really appreciated that this is an element of it, which maybe. But on the other hand—

52:12Craig Manchuck:But the gating itself, you mean? Yeah, the gating itself.

52:14John Sheehan:But on the other hand, like the industry wouldn't be as big as it is today were you not going out to these less sophisticated investors. So, yeah, two sides of the same coin there. All right.

52:26Craig Manchuck:Shall we leave it there?

52:27John Sheehan:Let's leave it there.

52:28Craig Manchuck:This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.

52:33John Sheehan:And I'm Jill Weisenthal. You can follow me at The Stalwart. Follow our producers. Carmen Rodriguez at Carmen Armin. Dashiell Bennett at Dashbot. Kel Brooks at Kel Brooks. and Kevin Lozano at Kevin Lloyd Lozano. And for more Odd Lots content, go to Bloomberg.com slash Odd Lots. We have a daily newsletter and all of our episodes. And you can chat about all these topics 24-7 in our Discord, discord.gg slash Odd Lots.

52:57Craig Manchuck:And if you enjoy Odd Lots, if you like it when we have nuanced discussions of private credit, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad-free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening.

53:47Craig Manchuck:The Bloomberg Sustainable Business Summit returns to Singapore on July 22nd. Our fifth annual Asia Pacific Summit will explore how business and finance leaders are shaping the next phase of globalization by strengthening resilience, advancing climate adaptation and driving a multi-speed energy transition across Asia's diverse markets. Join us for solutions-driven discussions, interactive workshops, and networking opportunities. Learn more at bloomberglive.com slash SBS dash Singapore.