Traci Alloway

And ultimately over time, what they've done is they've shrunken those teams and just said, here, you guys source the transactions for us and then we'll give you guys the money and you can go do it yourselves sort of on an outsource basis.

So

Naturally, it is a very good fit for them because they do have long duration assets and there's generally not a rush for those assets.

Could you say a little bit more about how competitive it's been in the past to source private credit deals if you're on the investor side?

We hear these stories about basically private companies can kind of dictate the terms of the deals because there's so much overwhelming investor demand and you get this vision of people like literally pounding down the door to get in on a particular loan.

Was that accurate in the past?

No, I think even the managers of private credit

would tell you in honesty, maybe not on the record, that they're surprised how quickly this has grown.

So if you look at some of these funds that have grown 10x over the last five, 10 years, I don't think that they have grown their sourcing abilities by five to 10x.

So if you contrast it to, say, private equity, the way a private equity fund works is

They find the investment opportunity and then they go call the funds from their LPs.

Private credit, most of these funds work where they've taken the money first and then they go out and find the investments.

So they're under much more pressure to find investments, which creates this competitive environment that you alluded to.

Some of the issues that we talked to that may have been in the public markets in the past tell us that when they go to the private credit market, it's just a competition for who jumped the highest for the piece of meat.

And what that translates to in the credit world is either lower interest rate, weaker covenants, or a combination of the both.

And that's really what you've seen with private credit in this hyper competitive environment that we're in now.

One other thing that John mentioned, which is actually really important here.

So the structural side, this is the liability side of the balance sheet for private credit guys.

is kind of critically important here so if you're out there and you're raising an institutional fund those institutional funds are generally drawdown funds so they're allowed to go out market and say okay we've raised commitments for five or ten billion dollars we're going to go out now and source our investments which is the asset side the lp commitments are the liability side so

they will take on those liabilities as they find the assets and they end up being matched.