Traci Alloway

Tell us about how the sort of, I guess, menu of credit options has expanded post the 2008 financial crisis.

That's basically a long-winded way of me saying, where does private credit come from?

So private credit had been in existence prior to the financial crisis, but really saw expected growth after the financial crisis.

So if you go back into even the 80s with the growth of the high yield market, prior to that, highly levered companies, companies that didn't have investment grade balance sheets, couldn't really borrow much in the public markets.

So either they financed internally or

relied much more heavily on the bank market.

As the high yield market grew, famously with the help of Milken, it allowed more companies, more highly leveraged companies to access public markets.

That evolved into the leveraged loan market.

The leveraged loan market, once upon a time, used to be held on the bank balance sheets.

They began to syndicate those loans and what was really the step function there was the evolution of the CLO market, where the banks could take those loans

put them into a securitized structure, which became CLOs, which led to the growth there.

Then after the financial crisis, the bank regulators really did not want banks lending to highly levered and or risky entities, both corporations and individuals.

So you saw pretty strict capital requirements.

There is an explicit prevention from banks lending to companies with greater than six times leverage.

That created this need for lending outside of the bank market.

Those companies didn't go away.

Their borrowing needs didn't end.

So that vacuum was created by private credit.

So you saw many of the same

entities that were lending in the private credit market, previously in the private equity market.