Weather’s role in wildfires in Atlantic Canada | SaltWire #weather #climatechange #wildfireseason - To some elite financiers who gathered in Los Angeles for the Milken Institute conference, a debt binge in private markets is reminding them of the go-go days of risk-taking before the 2008 financial crisis.
"Now that we've had a real hiatus in their ability to exit a lot of these , they've had cash flow difficulties," said David Hunt, CEO of Prudential Financial's $1.3 trillion asset manager PGIM, referring to private equity firms."And in order to deal with that, they have now been adding leverage to the fund level. So, they've got leverage on leverage."
The massive size of the market means excessive debt and financial engineering are causes for concern, as losses stemming from an economic slowdown or other shocks can threaten broader financial stability. Further, the opacity of the market can undermine confidence in the system and complicate regulatory response in case of problems, as has been evident with shadow banking debt issues elsewhere, like China.
But that person and other financiers said that may not hold true across the market. Tony Yoseloff, managing partner at Davidson Kempner Capital Management, during a panel discussion cited Bank of America data to say that 22% of direct lending borrowers generated negative operating cash flow, and of them 8% had only enough cash to last two years or less.Rapid growth has meant increased competition, with both more money and players flooding into the private credit market.