Private Credit Is a Driver, Not a Drug, of the American Economy

In January,亚博赞助欧冠published an opinion piece by Dan Rasmussen and Greg Obenshein titled “高产是羟甘氨酸。私人信用是福坦基.” In response, Drew Maloney – President and CEO of the American Investment Council and a former senior official in the U.S. Department of the Treasury – wrote the below for亚博赞助欧冠.

Recently, there has been more coverage from all perspectives about the private debt market and its role in today’s economy. The reality is that businesses of all sizes across America turn to the private debt market for critical capital for operations and expansion – without relinquishing ownership or control.

These loans are the main means of borrowing for the roughly 70 percent of businesses in the U.S. that lack access to the public debt market, a group that includes countless household names and just about every local business in the U.S. Despite the recent growth in private credit lending, those loans represent less than 5 percent of the total debt market, roughly equivalent to the market cap of Apple – a single company.

由于私人债务市场由对无法筹集投资损债的企业的贷款组成，因此有些人将其与借款狂欢和脆弱的金融工具相比，这一产品不利地进行了比较。

Those comparisons are inaccurate and unfair.

Most businesses lack access to public equity or debt – and most businesses are not “investment grade” – including a number of household names, such as American Airlines, Avis Budget Group, and Wynn Resorts.

This is particularly true for the small- and medium-sized businesses that drive our economy. Many of these companies will secure a “leveraged loan,” which simply means a non-investment-grade loan, to meet their credit needs. Because banks are less engaged in corporate lending than they were before the financial crisis, other entities have increased their lending to provide this capital to fund operations, innovation and expansion. The private debt market has existed for years, but banks are no longer its dominant players.

Banks reduced their private lending in large measure because of rules established in the wake of the financial crisis that forced these institutions to reduce their overall loan exposure and limit their ability to engage in trading. Private credit funds and other non-banks have since stepped in to fill that void, providing an important source of credit and further diversifying risk among a broader set of investors. Many of these newer entrants created more tailored products to the needs of private companies in need of credit.

The market for private debt is incredibly sophisticated and regulated by the Securities and Exchange Commission. These loans are carefully underwritten, and the lenders typically have skin in the game. In the case of private credit, firms (and, in many cases, the individuals who work for them) are putting their own capital at risk – because that is what investors require – so they care deeply about being paid back. If they don’t, they personally lose money.

This is long-term capital that is not governed by the same whims of the public debt market. Private credit funds have been in this market for decades and price this risk appropriately. Even regulators who have raised concerns about the recent growth in private debt acknowledge this lending does not pose a systemic threat to the entire economy.

倾向于将私人市场债务与抵押贷款支持证券相比的一些帆布产品进行比较。但这些比较是误导性的。对于初学者来说，金融危机是通过抵押贷款的大措施驱动，这是消费者债务的形式。拥有这笔债务的大多数资金被严格禁止持有任何类型的消费信贷，在最近的谣言中抛出冷水，这市场正在资助抵押债务。

美联储主席Jerome Powell，财政部长Steven Mnuchin和证券交易委员会主席Jay Clayton全部被驳回了这些私人市场贷款对银行系统产生风险的担忧。

Private lenders are sophisticated investors buying credit in businesses that know the markets in which they operate. Most of the managers who invest in these loans are looking to diversify a small slice of their portfolio. Unlike banks that borrow short and lend long, the assets in private credit funds match their liabilities. This means they don’t need to sell assets to generate liquidity when prices fall.

Private market debt would avoid that vicious cycle because lenders are well capitalized and largely isolated to the private market. Fed Chairman Powell acknowledged those benefits in a 2018 speech to the Economic Club of New York, telling the crowd that, in a downturn, most of the corporate loan losses would “fall on investors in vehicles like collateralized loan obligations with stable funding that presents little threat of damaging fire sales.”

此外，私人信贷资金为投资者提供稳健的回报，而不是其他流行的投资工具，包括公共股票。

据塔比手册，通过2019年第一季度，私人信贷资金在前五年内产生了近7％的平均年度收益率近7％。在同一时期，私募股权基金生产的年度回报是13.5％，而标准普尔500指数的年度收益率接近11％。

The private credit market has been mischaracterized by some who do not fully understand it, as well as others who have a financial motivation to raise doubts about these investments. That is why it is important to establish what this market is – and what it isn’t – so investors understand the opportunities and risks and the public more broadly appreciates just how important these funding tools are for the small- and medium-sized businesses that power our economy.