Private credit defaults are relatively contained, with most of the stress in the sector being liquidity- and rate-driven, the head of Ares Management Corp said on Wednesday.
“There’s nothing that we’re seeing in our portfolios or in the market broadly that would say that we’re about to have a major default cycle,” Michael Arougheti, chief executive and co-founder of the $622 billion alternative investment firm, said at the HSBC Investment Summit in Hong Kong.
The $3.5 trillion private credit sector has drawn in pension funds, insurers and wealthy individuals with the promise of steady, higher yields, but its rapid expansion into less liquid, harder-to-value loans has raised concerns.
The asset class has been in the spotlight after AI risks, fund outflows and fears of credit stress hammered alternative asset managers’ stocks.
Blue Owl suffered from redemption requests that were significantly higher than peers in the first quarter, as jittery retail investors bailed out.
Wall Street executives said they were stress‑testing or monitoring private credit portfolios, but that they were comfortable with their exposure.
The pressures observed in the market have largely been linked to software-sector repricing, Rachel Lord, a senior BlackRock BLK executive, said at the same forum in Hong Kong.
The industry should design products to match each client’s liquidity needs and time horizon, and with better transparency and data, concerns should lessen, Lord said.
“There’s volatility, but there isn’t a bubble,” she said.
“The fog of private credit is going to clear.”
Reuters
