What we’re watching

In the December quarterly report, we highlight the decline in U.S. private market credit spreads during 2024, reflecting the resilience of credit markets to rising interest rates despite persistently high inflation. However, the report also notes elevated U.S. speculative-grade default rates and record corporate insolvencies in Australia, underscoring the ongoing challenges posed by higher borrowing costs.

Tis the season of outlooks and reviews. As we did last year, this month we’ll share some books, podcast and other things that have influenced our team’s thinking during 2024.

We examine what the new Trump presidency means for the US sovereign, discussing which parts of the private credit market are most exposed to the prospects of higher deficits.

The September Quarterly Report highlights a divergence in credit market performance, with high yield appearing expensive relative to investment grade, while private markets offer more attractive opportunities amid increased scrutiny of default rates.

With so much focus on the topic of governance in private debt, this month we review David Einhorn’s classic story of the demise of a pre-GFC private lender.

This month we compare Q2 banking results in the United States with the national champion CBA.

We provide our quarterly around-the-grounds perspective on public and private credit markets discussing the fastest start to the year for securitisation markets since 2007, the end of the Term Funding Facility and the ongoing issues in the US commercial real estate markets.

This month we discuss whether the perceived imbalance between supply and demand in Australian housing markets is as substantial is it is made out to be.

This month we discuss whether the private credit market is losing some of its appeal. Demand seems to have peaked in the United States and there is evidence of tighter pricing and greater competition from public markets. We assess whether the same is true in Australia.

In this month’s “What We’re Watching”, we provide our quarterly around-the-grounds perspective on public and private credit markets highlighting how the risk on rally that began in Q3 2023 may have run its course.

The team takes a trip down memory lane and discusses how staying open minded in the aftermath of the Global Financial Crisis allowed them to access highly attractive investment opportunities which other investors refused to even consider. The team draws parallels with the pricing of Collateralised Loan Obligations today arguing that they still offer additional returns as a result of a lingering negative perception connected to the performance of other structured finance securities during the GFC.

In this thought piece we discuss insecurity about cyber security, a risk factor that is increasingly relevant but remains underappreciated. We explore how to consider cyber risk in due diligence of individual investments, in portfolio construction, plus how to assess an investment manager’s preparedness to manage cyber risk at the fund level.