Jonathan Gray

fraud, not disclosing liabilities, double pledging collateral, those are hard things to catch.

And so that to me is a little more understandable.

And I do think you have to look at this in the scheme of overall credit.

Look at what's happening in the banking system,

Their defaults continue to be very low.

They'll realize loss is very low.

It's a similar story in private credit.

So in aggregate, the system to us feels very healthy.

There will be these one-off situations.

And certainly, as you get deeper into a cycle, could you see defaults go up or losses go up off of these very low base today?

Yes.

But overall, again, I think the system feels pretty good to us.

Well, I still think it's a very good time for private credit.

I would acknowledge that as base rates come down and as spreads tighten, some of the very high returns that were achieved being a senior lender in private credit, that's harder to do, achieving mid-teens returns.

But the premium relative to liquid credit, what you get in leverage loans and high yield, that's enduring because you have this farm to table model.

You're bringing investors right up to borrowers and knocking out a bunch of origination and securitization costs.

And so I think the key thing is not necessarily the absolute return, but can you deliver a premium return over liquid markets?

And that I continue to have very high confidence in.

And that's why I think we'll continue to see flows into private credit, not just non-investment grade,

But investment grade, what we're seeing with insurance clients, the momentum in that area is pretty remarkable because insurance clients recognize, particularly as base rates and spreads come down, that getting that extra return from private credit without taking on any additional risk, that makes a ton of sense.