Natixis CIB recently held its 3rd annual Private Debt Forum, bringing together industry leaders and experts to discuss the evolving landscape of private debt.
Kicking off the day’s events, Michael Haize, Head of Global Markets at Natixis CIB, underscored the impressive growth of private debt as a significant asset class, now worth close to $2 trillion globally, reflecting the resilience of economic fundamentals in global markets, despite geopolitical challenges.
Alternative Asset Managers and Banks: A New Ecosystem Taking Place
The first panel of the day focused on the evolving dynamics between banks and alternative asset managers. The discussion was moderated by Mathilde Boyez, Head of Asset Managers Coverage for EMEA at Natixis CIB, and featured panelists Ed Cook, Head of Private Market Strategy and Capital Markets, EMEA at BlackRock; Matthew Harvey, Executive Managing Director, Head of Direct Lending at PGIM Private Capital; and Milan Stupar, Co-Head of Regulatory Capital and Specialty Finance at AXA IM.
The relationship between banks and asset managers has evolved significantly, moving towards collaboration rather than competition. Traditionally, banks have offered lower-cost financing, while asset managers bring agility and expertise to identify niche opportunities that banks may overlook. This collaboration enables both parties to leverage each other's strengths, ultimately benefiting their clients.
Within this collaborative framework, the private credit market stands out, projected to grow from $200 billion 25 years ago to an estimated $2.8 trillion by 2028. This growth is driven by regulatory pressures and increasing investor demand for alternative financing options. Panelists highlighted the diversity of asset types within private credit, allowing for tailored solutions that meet issuer requirements effectively. Moreover, private credit often acts as a counter-cyclical asset class, providing stability during public market turbulence.
A Deep Dive into the Private Credit Landscape
In an engaging fireside chat, Khalid Krim, Head of Banks, Asset Managers & International Public Sector at Natixis CIB, and Christian Stracke, President and Global Head of Credit Research at PIMCO, discussed the evolving landscape of private credit and strategic reallocation within the space.
The dialogue highlighted the increasing demand for private credit solutions among borrowers, including corporations and sovereign entities, as it not only provides flexible financing solutions for borrowers but also offers clients a means to diversify their portfolios by accessing the illiquidity risk premium. The current market presents evolving opportunities in direct lending, despite associated risks, particularly with legacy portfolios that may contain unsustainable capital structures due to low interest rates and high valuations.
While the deal flow in direct lending may be slowing, the quality of new lending opportunities is improving, as evidenced by decreasing leverage ratios and better credit profiles. There is also significant growth potential in non-corporate private credit, particularly in asset-based financing, which is expected to expand in Europe in line with trends established in the U.S.
Alternative Source of Capital and Risk Transfer Transactions
Moderated by Eric Elbaz, Global Head of Credit Sales, and Head of Global Markets Sales and Structuring, APAC at Natixis CIB, panelists Frank Benhamou, Risk Transfer Portfolio Manager - Cheyne Capital; William Guemar, Consultant HPS Investment Partners; Zaheen Mir, Partner at Blackstone Credit & Insurance; Laurence Raven, Head of Special Situations at Alcentra; and, Adam Wheeler, Co-Chief Executive Officer at Corinthia Global Management, the panel addressed various aspects of fundraising in the private credit market, including innovative structures and the impact of regulatory changes.
The speakers highlighted the significance of various structures, such as Business Development Companies (BDCs), Separately Managed Accounts (SMAs), interval funds, and joint ventures, in reshaping private credit fundraising. These structures are designed to cater to the diverse needs of different investors. With the growth of private markets demanding broader investor access, particularly from insurance companies with region-specific requirements, innovative solutions are essential.
One of the key themes of this panel was the rising popularity of evergreen funds – investment vehicles that allow for continuous capital inflow without a predetermined end date, thus catering to long-term investors. In stark contrast to traditional closed-end funds, which require time-bound commitments, evergreen structures offer liquidity and flexibility, catering to institutional investors seeking stable returns and access to capital.
What is the Role that Insurers are Playing and Can Play in Private Debt?
The third and final panel of the day focused on the evolving landscape in relation to insurance companies and asset managers. Moderated by Emmanuel Issanchou, the Head of Global Markets Americas and Global Head of Credit Markets at Natixis CIB, with Frank Meijer, Global Head of Alternative Fixed Income & Structured Finance at Aegon Asset Management, and Jesus Rio Cortes, Partner at Apollo Management International LLP.
Scarcity of assets emerged as a central theme, prompting discussion on the implications for capital deployment and investment strategies, especially in sectors such as direct lending.
The competitive landscape in the middle market is becoming increasingly crowded, with numerous investors vying for a limited pool of opportunities. This situation heightens the risk of spread compression and complicates efforts to maintain rigorous underwriting standards.
Echoing discussions from the earlier panel, regulatory impacts were also touched upon, within the context of how regulation shapes asset allocation decisions for insurance companies and other institutional investors. Often, regulations vary from market to market, bringing distortive effects that impact market dynamics, and influence the demand for certain asset classes over others.
Deep Dive Regulation – A double Edged Sword?
Regulation emerged as a central thread throughout the day’s discussions, highlighting its profound impact on private credit markets and ability to shape interactions among various stakeholders, including banks, alternative asset managers, and institutional investors.
Concluding the day, Elie Bitton, Global Head of Global Market Sales & Structuring Global Markets, at Natixis CIB reflected on the evolving landscape of the credit market and the significant trends shaping its future.
The private credit market is undergoing significant evolution, marked by rapid growth and increased accessibility. Structural changes in how the market is funded are connecting diverse assets with a new class of investors. This transformation is partly driven by demographic pressures on retirement systems, leading pension funds to seek external asset management and origination solutions. Additionally, shifts in environmental, technological, and societal factors are expanding the demand for private capital across industries like healthcare and infrastructure. While these developments present opportunities, they also introduce potential risks, especially in retail investment and pricing dynamics, requiring careful management and strategic foresight
Ultimately, private credit is full of opportunities, but stakeholders must work collaboratively to effectively navigate the evolving landscape.
Thank you to all our speakers and participants for joining the 3rd annual Private Debt Forum and for sharing your insights.
Off Screen @ The Private Debt Forum
Discover the insights from our previous editions of the Private Debt Forum:
Natixis CIB’s Private Debt Offering
Natixis CIB’s private debt proposition combines leading origination capabilities, a systematic and consistent distribution of new production from our portfolio, with a focus on meaningful investor engagement, a quality portfolio management team and the possibility for managed account wrapping through its affiliated asset managers.
Aligned with its general strategic ambitions, Natixis CIB’s private debt approach benefits from a global, diversified approach, which is committed to the energy transition.
