Andy Darroch

So private credit was really born out of filling a gap left post the GFC.

So what you saw was banks retreated from certain kinds of lending post the GFC.

And this has led to, I suppose, what you call an explosion in private credit.

So broadly speaking, it's about $3 trillion, give or take, globally.

And in Australia, it's $200 billion alone.

So again, another thing that really fueled its rise, I think, is three major factors.

First of all, it's got a very symbiotic relationship with private equity.

Secondly, as well, I think it coincided with a period of low rates.

So you had a lot of investors on their fixed income side of the portfolio not getting returns that they had hoped for.

And private credit seemed to offer an ability to get a high rate of return on what was broadly classed as fixed income.

The last thing I'll just quickly mention is these firms are extremely profitable.

And so there's been an intense desire from the firms that manage these kinds of assets to get as widely distributed as possible.

So Blue Hour is kind of the poster bird for things that aren't going perfectly in private credit.

So there's been a couple of things that have happened and there's been murmurs in this field for coming up on two years, I think it's fair to say.

What's really hit home for Blue Owl is they have a large contingent of individual or what's termed retail investors.

So historically, this stuff was used by big super funds, sovereign wealth funds and the like.

So Blue Owl were one of the first to really get a big book of, you know, retail investors.

yep individuals and you know some of these moms and dads are extremely wealthy but they are individuals and so another problem that has arisen for blue owl is what's been termed the saspocalypse and essentially this is the base the case that you know ai may indeed render a lot of software businesses either a lot less valuable than they were 12 months ago or even you know

not worth much if anything and so blue hour has a lot of exposure to tech businesses which are very much radioactive to a lot of people at the minute specifically software businesses and secondly they've got a lot of individual investors so that's basically led to a bit of a you know not ideal mix of two things coming at once whereby a lot of people are trying to get their money out and then secondly it's quite hard to determine what their money is worth

Because again, it's tied to businesses, which it's hard to say what they're going to look like 12, 18, 24 months from now.